Iron ore plunges to 5-year low: Is now the time to buy?

The iron ore price plunged a further 1.6% overnight, extending its decline to more than 50% since the beginning of the year as concerns grow for China’s consumption levels.

The commodity fell overnight US$1.06 to US$66.84 a tonne – its lowest level since June 2009. The decline comes as a result of a tidal wave of fresh supplies from miners like BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO), combined with slowing demand growth from China. In fact, the Australian Department of Industry recently cut its price estimate for 2015 by 33% to just US$63 a tonne with China now set to record its lowest annual growth rate in a quarter of a century.

While each of Australia’s iron ore producers have felt the pain of the sliding prices, so too have investors who have watched their shares shed more than 90% in some circumstances. For instance, Arrium Limited (ASX: ARI) and BC Iron Limited (ASX: BCI) are down 90% and 91% since the beginning of the year respectively.

Atlas Iron Limited (ASX: AGO) has also seen its shares drop 88% and just yesterday announced that it will take up to $900 million of write-downs on its Pilbara assets in the first half of FY15, citing the challenging conditions facing the sector.

With iron ore tipped to fall even lower in 2015, there is every chance the miners could slip even further. Investors would be well advised to steer well clear.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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