The price of iron ore, measured for immediate delivery at the Qingdao port in China, slipped 1.2 per cent to $US69.58 per tonne, the lowest level since June 2009, according to Metal Bulletin. Iron ore has slumped 11.5 per cent in November and is down more than 49 per cent in the calendar year.

A slowdown in China's residential property sector, which accounts for 24 per cent of steel consumption in the country, continues to weigh on the raw steel-making ingredient.

The first interest rate cut in more than two years from the People's Bank of China has not been enough to improve sentiment. Analysts have said it would take larger, more targeted stimulus to lift the iron ore and steel markets out of their current lulls.

"China doing a rate cut is a small step in the right direction. We just need to see stimulus announced to support this, and it's got to be a decent amount of new stimulus in steel intensive areas of infrastructure & rail to encourage a significant iron ore demand pickup," Platypus senior analyst Anna Kassianos said.

Last week, data from China's National Bureau of Statistics showed that average price of new homes across 69 of 70 Chinese cities measured slumped for the sixth-straight month in October. In the year to October, prices fell across 67 of 70 cities.

A ramp up in production from the world's largest iron ore miners, BHP Billiton, Rio Tinto and Vale has also created a surplus of supply, which has driven the benchmark price down.

"[BHP and Rio] are determined to execute their iron ore expansion plans. They're both about volume maximisation, not profit maximisation, which rarely ends well. They'll continue to kill the iron ore price, that's our view," Ms Kassianos said.

Metal Bulletin research manager Alistair Ramsay said the physical iron ore market was now being influenced by the futures market. Dalian iron ore futures dropped 2.7 per cent on Tuesday to 463 yuan ($88.47).

However, iron ore prices should be supported and even strengthen from current levels, Mr Ramsay said, because there has been a pick up in demand for steel following the APEC meeting in Beijing, steel mills are finally seeing higher margins, with demand for steel, and therefore iron ore, picking up.

But, there are still risks.

"Credit remains a concern for purchasing managers despite recent policy changes, and China plans to lower domestic iron ore tax burdens, though not this year, and reform the resource tax from a volume-based to price-based burden." Mr Ramsay said.

There is clearly disappointment that the rate cut from China's central bank has not translated to a stronger bid for iron ore, CLSA head of commoditites Andrew Driscoll said.

On Monday, the initial reaction was positive. BHP Billiton posted its biggest daily gain in three years, up 3.8 per cent, while Fortescue Metals surged 10.8 per cent, its biggest daily jump in more than two years. Rio Tinto, Atlas Iron, BC Iron and Arrium all posted strong gains

However, on Tuesday the story was very different. BHP shares dropped 2.4 per cent, Fortescue shares slipped 5.7 per cent and Rio Tinto shares fell 1.5 per cent.

Among the smaller miners, BC Iron shares lost 4.2 per cent, Atlas Iron finished 2.4 per cent lower and Arrium dipped 5.7 per cent.

"Despite the resumption of steel production post the APEC meeting and positive macro news, the market clearly remains subdued and is lacking any confidence," Mr Driscoll said.

"With the iron ore forward curve now into the US$60s, we think a lot of the downside is priced in for now, particularly with seasonally stronger first quarter approaching."

The traditional re-stocking period in anticipation of wet weather in the Pilbara may not happen this year unless there is major new stimulus from China due to high port inventory iron ore volumes, Platypus' Ms Kassianos said.

At the current price level, Australia's smaller iron ore miners are struggling to deal with the squeeze on margins.

"For the cases of BC Iron and Atlas, our view on them is that there needs to be some form of cash raising exercise to back them up and make sure they remain solvent," Ms Kassianos said.

"The real issue for these smaller players is that their all in sustaining capital and operating expenditure are higher relative to where the price is today, they're not making any money now."