Australia has slashed its price forecast for iron ore in 2015 by a third to $US63 a tonne from $US94 in September, saying expectations of a drop in Chinese output to counter a mounting global supply glut had yet to occur.

Iron or miners have been counting on a drop in Chinese output to help toughen a soft market for the steel-making ingredient.

A rapid increase in the global supply pool of iron ore - Australia's most valuable export, combined with moderating demand growth in China, resulted in the price falling nearly 50 per cent in 2014, Australia's Bureau of Resources and Energy Economics (BREE) said on Tuesday.

The price of iron ore has averaged $US90 in 2014 so far, but as of mid-December was trading around $US70, the lowest since 2009.

The steel-making raw material is headed for the biggest annual loss in at least five years as BHP Billiton, Rio Tinto Group and Vale expanded output, betting increased production would boost revenue and force less competitive mines worldwide to close. Gripped by a property downturn and excess capacity, China is set to grow 7.4 per cent this year, the slowest full-year expansion since 1990.

The market balance and low price have been exacerbated by China's domestic ore production, that is proving more resilient to the pricing downturn, BREE said.

"In previous cyclical price troughs, China's high cost production was quicker to exit the market but, after a period of focused cost reductions and efficiency gains, a higher portion of it is withstanding lower prices, albeit still operating at a loss," BREE said.

Benchmark 62 per cent grade iron ore for immediate delivery to China fell 2.2 per cent this week to hover at its 4-1/2 year low of $US68 a tonne, according to data from the Steel Index.

Despite record iron ore exports from Australia, up from around 465 million tonnes to more than 650 million tonnes a year since 2011, the price plunge points to a $US17 billion fall in the overall value of iron ore shipments in 2014, Reuters calculations based on company, government and pricing data show.

Smaller Australian iron ore miners are being offered a rebate on government royalties in an attempt to combat the impact of low ore prices on their businesses.