Benchmark spot iron-ore prices crashed deeply on Tuesday to its lowest level since July 2010 by a substantial 7.2 per cent fall - the biggest one-day drop in more than 26 months - to $128.50 a tonne. For over six weeks now, iron ore prices have been falling by more than 30 per cent.

But mining giant Rio Tinto expects steel demand from developing countries China and India will continue to spur production of the raw commodity even as China's real estate sector had started signs of cooling down.

"Iron ore and coking coal are the two crucial ingredients for making steel, and steel is the crucial ingredient as emerging economies urbanize and industrialize," Sam Walsh, chief executive officer of Rio Tinto's London-based company's iron ore unit, said at a business forum in Perth. "The long-term steel outlook remains positive."

The cost of iron ore have reached its 15-month low as Chinese steel mills began downsizing their production owing to tighter credit conditions and a cooling real estate market.

"Around 20 to 30 per cent of the small and medium mills in this area have shut down their furnaces," a steel executive in southern China said in the Financial Times. "Our mill hasn't reduced production yet, but we feel the pressure of reduced liquidity. When we make sales, the cash comes back slower and slower. Liquidity is a big concern."

Meanwhile, Rio Tinto remains confident sales of aluminum, copper and iron ore will double over 15 to 20 years as it believes China is in a very strong position to weather yet another global crisis and continue to grow fast, spurred by its own domestic demand.