In addition to the collapse in crude oil prices, there’s also been a collapse in the price of iron ore. And while energy exports such as crude oil and natural gas rank among Australia’s top 10 exports, iron ore is by far the country’s largest export, accounting for nearly 22% of total exports by value in 2013.

Iron ore had a surprise rally during the latter half of 2013, defying analyst expectations for what is traditionally a seasonally weak time of year. Prices were buoyed by Chinese restocking of inventories.

As 2014 unfolded, however, it became apparent that the pace of China’s growth and, therefore, its demand for iron ore were weakening. As a result, the price of the base metal steadily tumbled over the past year, dropping by nearly 50%.

So while the bear market in crude has grabbed plenty of headlines, iron ore has suffered a similar drubbing, with prices now at five-year lows.

Hopes of a bottom were rekindled during the first trading session of the new year, as the price of iron ore imports in China rose for a third consecutive day, to $71.26 per metric ton.

While mining giants such as Rio Tinto (ASX: RIO, NYSE: RIO) and BHP Billiton Ltd (ASX: BHP, NYSE: BHP) have break-even thresholds at $42 per metric ton and $51 per metric ton, respectively, iron ore’s price at current levels is below the break-even point for a number of other miners, especially juniors that piled in at the tail end of the resource boom.

In addition to waning Chinese demand, the other part of the problem is that projects initiated during the peak in mining-sector investment are finally coming on line, leading to a glut of production.

According to Bloomberg, another 150 million metric tons of supply are expected to be added in 2015, following the addition of 120 million metric tons last year.

Record supply caused a 22.1% jump in Chinese iron ore inventories in 2014, with China’s iron ore imports up 13.3% over the trailing 12-month period that ended in November.

Given this oversupply, China’s demand for iron ore is expected to only rise slightly in the coming year.

In fact, the Middle Kingdom’s steel demand is already at its lowest level since the Global Financial Crisis. The Chinese construction industry, which is one of the biggest consumers of steel, is suffering from a contraction in the country’s real estate market. For instance, November housing starts were down 34% from the prior year.

But markets aren’t static, and eventually low prices will force higher-cost producers to idle their operations, which could help bring supply and demand back into balance.

Of course, companies such as Rio Tinto and BHP can afford to maintain or even expand production at current levels, stealing market share from upstart competitors and possibly even buying some troubled firms’ assets on the cheap.

Fortunately for Australian companies, some of the highest-cost miners are actually Chinese. And according to HSBC, Chinese miners have already curtailed production and could cut it even further.

The bank estimates that China’s iron miners cut production by about 15% last year and projects that it could fall by as much as another 40% this year.

The drop in the Australian dollar has also helped lower break-even points for producers down under, bolstering their competitive edge against Chinese producers.

But for now, the two aforementioned majors are best positioned to endure the downturn in iron ore prices, while opportunistically acquiring beaten-down peers.