Dwindling demand for steel in China’s property sector has pushed the price of iron ore to a new, five-year low as the world’s largest iron ore miners further pump supply into the market.

Iron ore, for immediate delivery to the Qingdao port in China, slipped 0.8 per cent to $US68.05 per tonne, overnight on Wednesday, according to Metal Bulletin. The steel-making ingredient has plunged 48.8 per cent this calendar year.

The average price of new homes in China fell for the sixth straight month in October and on a year-on-year basis they are down 2.5 per cent.

The surprise rate cut by the People’s Bank of China in November as not been enough to stimulate iron ore prices and with the world’s second largest economy looking to transition away from fixed-asset investment growth into more consumption driven growth, prices are unlikely to return to levels seen at the beginning of 2014.

Morgan Stanley has cut its base price for iron ore for each of the next six years. The investment bank is forecasting iron ore to average $US79 per tonne next year and will slowly move down to $US70 per tonne in 2020.

However, Morgan Stanley have also outlined their bull and bear cases for the commodity, stating it could slump to $US59 per tonne next year, and could push as high as $US95 per tonne.

“The relatively low-cost supply surge continues to dramatically alter the character of the industry’s supply side,” Morgan Stanley analyst Brendan Fitzpatrick said.

“The exit of high-cost capability everywhere has begun. Capex and project deployment will decline significantly across the industry; the cost curve will progressively flatten; and the supply side will incrementally consolidate.”

The iron ore industry is still in a process of rebalancing, Mr Fitzpatrick said, it generally takes six months to a year for production cuts to occur because of previous contractual commitments.

“Many of the mining operations that emerged over the past decade are unviable at current prices,” Mr Fitzpatrick said.

“The most-exposed of these include low grade iron ore operations in Hebei province, northeast China, and small operations in Australia and Brazil.”

As part of the Mid-year Economic and Fiscal Outlook (MYEFO) Treasurer Joe Hockey said the plunged in the iron ore price from $US120 per tonne 12 months ago to will cost the budget $9 billion in revenue over two years.

““We are forecasting that it will remain around $60 a tonne for the foreseeable future. That more than 30 per cent fall in iron ore prices has had a big impact on the budget,” Mr Hockey said.