Unfortunately for its shareholders, one of the worst performers on the market today has been the Rio Tinto Limited (ASX: RIO) share price.
At the time of writing the mining giant's shares are down 4% to $59.26, wiping over $1 billion off its market capitalisation.
As one of the world's biggest iron ore producers, today's decline is unsurprisingly linked to the sharp drop in the iron ore price.
According to Metal Bulletin the spot price for the benchmark 62% fines fell 8.5% overnight to US$68.04 a tonne. This is the lowest price iron ore has traded at since November of last year and is 28% off its February high of US$94.86 a tonne.
It isn't just Rio Tinto suffering from declines today. The materials sector as a whole has tumbled 2.8% thanks largely to sizeable declines from fellow iron ore producers Fortescue Metals Group Limited (ASX: FMG), BHP Billiton Limited (ASX: BHP), and Atlas Iron Limited (ASX: AGO).
What's next?
Unfortunately it appears as though iron ore could still fall further from here, potentially dragging Rio Tinto along with it.
The Metal Bulletin has reported that iron ore buyers have vanished and are likely to be working through the stock piles that have built up in the last few months.
So with demand dropping, supply expected to increase from Australian and Brazilian exporters, and short sellers reportedly taking aim at the metal, I wouldn't be at all surprised to see iron ore slip to US$60 a tonne or below in the near future.
Because of this I think investors should stay clear of Rio Tinto and other iron ore producers until the iron ore price has found its bottom. At which point they might be worth taking a closer look at again.
But for now, I feel investors may be better served with investments in the telecommunications or healthcare sectors.
