The spot iron ore price continued its rapid descent overnight, dropping a further 1.4% to record a new five-year low at just US$75.38 a tonne. It has now dropped an agonising 44% since the beginning of the year, while it has fallen more than 10% since its minor recovery in mid-October.
And it seems like the situation is about to get even worse. Fresh forecasts are suggesting that the commodity could be trading at just US$70 a tonne by the end of the year. That reflects a further 7.1% downside in the next seven weeks.
The declining prices are certainly a concern for the nation's junior miners. Outside of the three big players, being BHP Billiton Limited (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG), Australia's smaller miners are at serious risk of operating at a loss. We've already seen the shares of companies like Atlas Iron Limited (ASX: AGO) and BC Iron Limited (ASX: BCI) crash in recent weeks as margins continue to weaken.
Although BHP's and Rio Tinto's shares have come away relatively unscathed from the most recent trough, they could experience further slides should the commodity's price fall as considerably as some analysts are now expecting.
While I would certainly be avoiding any of the junior miners, I would even go so far to say that BHP and Rio Tinto should also be avoided, for now. While they're great companies, I believe investors could be presented with an even greater buying opportunity in the weeks or months ahead.
