Supply expansion by the top miners has boosted oversupply and hurt prices. Falling Crude steel output along with a slower-than-expected shuttering of high cost iron ore mines in China, also contributed to the sharp price decline.

According to Chinese custom data, imports totalled 96.27 million ton in December, blowing away the previous record high of 8.83 million tonnes set in January 2014. Over 2014, they totalled 932.5 million tons from 820.3 million tons in 2013, the data showed.

While demand from China remains firm, the uplift has been unable offset increased seaborne supply from the likes of Australia and Brazil, leading to a substantial decline in the price for benchmark ore last year.  China can get iron ore from Australia and Brazil so cheaply that there's less need for domestic supplies, Business Insider Reports.

To compensate for shrinking demand at home, steelmakers in China are exporting at record level. Outbond cargoes of steel products rose 11 percent to 10.66 million tons in December from the previous month, the second highest ever, according to customs data. For full year, Chinese steel export have nearly doubled over the past two years, surged to 112.4 million tons, an all-time high. China makes about half the world's steel and buys more than two-third of seaborne iron ore.

Ore with 62 percent content delivered to Qindao retreated 4.1 percent to $39.51 a dry ton on Wednesday, dropping for a seven straight day, according to Metal Bulletin Ltd. The Commodity bottomed at $38.30 on Dec.11, a record low in daily prices dating back to May 2009

"With prices dipping below $40 a ton early December, there appears to have been some opportunistic buying, However, the fact that a lot of that iron ore was stockpiled suggests end use remain tepid," Australia & New Zealand Banking Group Ltd. Said in a not as quoted on Bloomberg.

China's economy likely grew by around 7 percent in 2015, in line with the government's official target. December imports fell 7.6 percent, receding for the 14th straight month but not as sharply as feared. Meanwhile, export from the world's largest trading nation fell 1.4 percent from a year earlier, CNBC reports.

Many smaller producers have exited the market and other are trying to survive. Domestic Chinese producers which struggle with low grades and high production cost have been most affected. Chinese mines are staying open only because of support from local governments pressure to keep jobs safe. The Country's miners produced some 400 million tons a year on a 62% Fe-basis.