* Iron ore prices slip below $80/t for first time in 5 yrs * Market still oversupplied, China demand recovery unlikely * Little sign of restocking ahead of next week's holiday By David Stanway BEIJING, Sept 23 (Reuters) - Steel futures in China continued their long slump on Tuesday, with no sign that steel or iron ore demand will pick up in a chronically oversupplied market. The most traded rebar contract on the Shanghai Futures Exchange fell 1.17 percent on Tuesday morning to another new low of 2,618 yuan ($426) per tonne. The most active iron ore contract on the Dalian Commodity Exchange dropped 0.5 percent to end at 557 yuan per tonne. Benchmark 62 percent iron ore for immediate delivery into China .IO62-CNI=SI fell below the important $80 per tonne level for the first time in five years, ending Monday at $79.8, according to The Steel Index, dashing hopes that end-users would restock ahead of China's weeklong Oct. 1 National Day holiday. The index has fallen nearly 41 percent since the turn of the year and more than 8 percent in September, normally a strong month for steel and iron ore in China, the world's biggest consumer of both commodities. Analysts suggested prices could drop even further, with China's leaders repeatedly ruling out the possibility of any large-scale stimulus in the coming months. "Without strong stimulus, domestic demand growth will continue to slow and restrain steel and iron ore consumption, meaning there is still room for iron ore prices to drop further," said trading portal GTXH.com in a note on Tuesday. Oversupply is still the major concern, with Nev Power, chief of Australia's Fortescue Mining Group, telling a Tuesday conference that supply is "not being cut back fast enough to reduce the overhang in the market". Many higher-cost Chinese iron ore producers have been keeping output at high levels despite widespread expectations that low prices would force them to shut. Traders in China insisted that most of the blame still lay with giant Australian miners Rio Tinto and BHP Billiton . According to the latest data, shipments of Australian ore reached the second highest ever in August and amounted to a record 62.9 percent of China's total import volume over the month, with many second-tier supplier countries driven out of the market by the price collapse. "Many producers have not closed immediately because they have earned very good profits before, so they have been waiting, but only the Australians and Brazil's Vale can continue at this rate - I think many in Africa or Canada will go next," said the head of a large trading firm based in Beijing. "Producers didn't think China could slow so quickly and they have invested a lot, so they have had to continue producing to maintain cashflow. A firm like Fortescue has to continue in order to break even," he said. According to data provider SteelHome, inventories of imported iron ore at Chinese ports reached 112.35 million tonnes by Sept. 19 SH-TOT-IRONINV, rising 300,000 tonnes compared to the end of the previous week and inching closer to a record high of 113.7 million tonnes set in early July. Rebar and iron ore prices at 0336 GMT Contract Last Change Pct Change SHFE REBAR JAN5 2618 -31.00 -1.17 DALIAN IRON ORE DCE DCIO JAN5 557 -3.00 -0.54 SGX IRON ORE FUTURES OCT 77.92 +0.09 +0.12 THE STEEL INDEX 62 PCT INDEX 79.8 -1.90 -2.33 METAL BULLETIN INDEX 80.1 -0.92 -1.14 Dalian iron ore and Shanghai rebar in yuan/tonne Index in dollars/tonne, show close for the previous trading day (1 US dollar = 6.1400 Chinese yuan) (Editing by Michael Perry)