MENU

One massive reason to avoid Australia’s iron ore miners

It was just over three weeks ago that iron ore experienced its biggest surge in more than two years.

Following the release of some upbeat Chinese trade data, the commodity skyrocketed 4.9% and was trading at US$84.17 per tonne. Investors in the sector certainly enjoyed the day with companies like Atlas Iron Limited (ASX: AGO) and BC Iron Limited (ASX: BCI) finishing the day trading almost 15% and 13% higher, respectively.

If ever there was unequivocal proof that a lot can happen in three weeks, it’s this…

Overnight, the commodity tumbled 2% to record its lowest price seen since September 2009 at just US$76.46 a tonne. That reflects a 9.2% drop since that memorable day last month.

And the miners are paying the price. Atlas Iron is down 5.6% today, while BC Iron is down 3.4%. Since that day, their shares have lost an incredible 40% and 46.8%, respectively.

If that doesn’t highlight just how dangerous Australia’s iron ore sector is right now, then nothing will. While some investors will no doubt try their luck in the hope of buying shares right before a big rebound, do yourself a massive favour and avoid the sector altogether.

Right now, I’d even be avoiding the bigger players, being BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG), at least until the high level of volatility blanketing the sector begins to die down. While they’re better equipped for lower iron ore prices, I expect their shares will still feel the pain.

One stock I am much more bullish on right now has just been named by our top investment advisor as his BEST stock to buy in 2015. Be sure to check it out below...

Hot off the presses! The Motley Fool's top stock for 2015 is a sexy ASX tech company with a stunning track record and plenty of room to run. Discover our analysts' hands-down favourite bet for 2015 in this brand-new FREE report. Simply click here to grab your copy.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.