After trading slightly higher for the first session after the week long Lunar New Year holiday, iron ore has slumped to a near six-year low, amid a lack of demand from Chinese steel mills.

The price of iron ore for immediate delivery at the port of Qingdao in China on Wednesday slumped 1.7 per cent to $US62.94 a tonne, according to Metal Bulletin, close to the low of $US61.20 it hit early this month – the lowest since the benchmark measure began in 2009.

Iron ore did not trade between Thursday last week and Tuesday this week due to the Lunar New Year holiday.

Since its 2014 peak, the price of iron ore has plunged 52.7 per cent. From its record high of $US191.70, reached in February 2011, the steel-making ingredient has fallen 67.2 per cent.

A flood of supply, driven largely by BHP Billiton, Rio Tinto and Brazil's Vale, combined with weaker demand out of China has been responsible for the re-rating of iron ore over the last 12 months.

Iron ore prices are expected to remain stagnant over the next few weeks until the construction season begins at the end of March, analysts said.

"The market is still in an 'off' mode now as Chinese buyers have not yet come back," Xu Huimin, an analyst with Huatai Great Wall Futures in Shanghai, told Reuters.

"The strong momentum ahead of the holiday was not sustainable. The steel demand recovery won't probably happen unless the government rolls out more policy easing and approves more infrastructure projects," she said.

The fall in iron ore came despite positive economic data out of China on Wednesday. Activity in China's factor sector moved to its highest level in four months, according to the HSBC flash purchasing managers' index (PMI). The PMI rose to 50.1 in February, but economists had been expecting a slight dip to 49.5.

The fall in the price of oil is, currently, taking some of the sting out of lower iron ore prices for producers, with less cost on diesel. Earlier in the week, BHP revealed a 29 per cent fall in the cost of producing iron ore in Australia in the first six months of the 2015 financial year, thanks in large part of cost cutting, lower diesel prices and currency movements.

"Falling transportation costs are eroding [Chinese] producers' geographic advantage and depreciating exporter currencies provide a further boost," Citi commodities analyst Ivan Szpakowski said.

"The burden of further supply curtailments is thus shifting towards Chinese miners."

BHP Billiton chief executive Andrew Mackenzie said on Tuesday that the iron ore price was likely to fall in the near term because of increasing global supply.

"In the next 12 month there is quite a lot more supply addition than there is likely to be growth in demand," Mr Mackenzie said in a call with analysts. "If anything, prices are more likely to go downwards."