BHP Billiton chief commercial officer Dean Dalla Valle has spoken out about iron ore plunging below $US50 a ton, saying there will be "short term volatility" in commodity markets while expressing confidence in China's long term demand for Australia's largest export.

Mr Dalla Valle, responding to a question from The Australian Financial Review in Washington amid a share market rout in China, said as China's economy rebalanced from investment to consumption, its demand for commodities had slowed to a more sustainable pace.

Commodity prices will "bounce around from day to day," he said. "They will overshoot and undershoot."

"China remains a significant contributor to world growth and its demand for energy and commodities continues to be within our expected range," Mr Dalla Valle said earlier.

"No doubt we will see some volatility and some bumps along the way."

He said it would be "difficult" for smaller high-cost producers, suggesting they should no longer be producing.

'IT'S GOING TO BE DIFFICULT'

The iron ore price tumbled 10 per cent to $US44.59 a ton on Wednesday night.

The price of the bulk commodity peaked around $US180 a ton in 2011 and has progressively fallen since, before the dive recently accelerated.

The iron ore rout has battered the share prices of BHP and Rio Tinto in recent days, while smaller high-cost producer are struggling to stay afloat.

Mr Dalla Valle attributed the collapse in the iron ore price to the huge ramp up in production by miners in response to China's earlier insatiable demand over the past decade.

The BHP executive suggested that higher cost producers struggling to be profitable at decade-low prices should cease production.

"We saw this unprecedented demand for iron ore going back a decade ago and prices went high," Mr Dalla Valle said at the Center for Strategic and International Studies where he spoke earlier about BHP's effort to deal with climate change.

"It incentivised a lot of supply now that probably shouldn't be there. It's going to be difficult."

"So now you have demand which is still strong, but it's a very well supplied market."

LONG-TERM OPTIMISM

Mid tier and smaller miners struggling to cope with the low iron ore price have blamed low-cost producers BHP and Rio Tinto for flooding the market and depressing prices.

At a sub-$US50 a ton iron ore price, virtually all of Australia's producers outside BHP and Rio are rendered unprofitable. There are fears a prolonged price slump will bankrupt smaller iron ore miners, force them to close down mines or sell assets.

Despite growing concerns about the slowdown in China's economy and the near-40 per cent crash in the Shanghai stock market over the past month, Mr Dalla Valle was optimistic about the emerging economy's long-term growth potential.

The Chinese economy is shifting from commodity-intensive construction to internal consumption, but BHP believes there will still be strong demand for steel-making commodities as China's economy matures.

The emerging middle class will need more vehicles for transport and BHP says China's demand for cars could reach 300 hundred vehicles per 1000 people by 2030 – less than half of the 700 per 1000 in the United States.

"There's going to be a lot more vehicles in China, a lot more steel, a lot more copper and certainly more fuel to drive them," Mr Dalla Valle said.

"You're going to need to house these vehicles, which means they will need bigger buildings with bigger basements, bigger garages and more steel."

Rio Tinto's London listed shares on Wednesday fell as much as 2.2 per cent to 2438 pence in London, the lowest since October 2009, while BHP Billiton dropped as much as 1.8 per cent. Locally in Australia on Wednesday, BHP tumbled 3.1 per cent to $25.43 and Rio Tinto crumbled 3.2 per cent to $50.06.