When the iron ore price began its precipitous fall last year, the avalanche swallowed some of the third-tier operators scuh as Western Desert and Sherwin Iron. There was minimal impact on investment markets but it was a harbinger of things to come. This week's potential collapse of Atlas Iron – the fourth-largest producer in Australia – heralds the second wave.

Of the larger junior miners like Atlas, there are none that analysts consider to be producing cash. In other words, their costs of getting iron ore out of the ground, transporting to market and paying the interest on their loans is greater than the money they get for selling it.

It's a position that some can sustain for a while – particularly if they have not borrowed heavily. But the status quo cannot remain unless the price of iron ore moves up significantly.

If not, these companies will have little choice but to sell their mines – an outcome that could see a flood of iron ore assets hit what will be a buyers' market.

The question is – at these iron ore prices levels of under $US50 a tonne – will there be buyers willing to invest in producing the main ingredient in the steel-making recipe when the appetite for steel in China appears to have already peaked?

The iron ore majors don't necessarily agree with these assessments of steel demand because they have long maintained demand will grow until 2020.

A spike in the iron ore price on Wednesday probably doesn't signal the slide has been arrested, if commodities experts are correct .

Thus, for the small producers it is a race against time.

Certainly it is for Atlas, whose shares have been suspended while it works out whether its lenders will give it breathing space and/or whether it can sell its mine assets.

The recent plunge in Atlas' share price to penny-dreadful levels suggests punters do not see its equity has much value.

Investors are now waiting to see whether it can strike a deal with bondholders that will enable it to stay on life support or if its financial position is terminal.

The issue for Atlas appears to be its debt schedule under which a big repayment is due in 2017. Its relatively small cash reserve is being eaten away as it produces at a loss.

The bigger question is how marketable its assets are. The company produces a relatively low-grade ore, which is less attractive to the big players, and it owns no infrastructure.

In times gone by, one of its more valuable assets was port access. But thanks to the debottlenecking by the likes of BHP Billiton and Fortescue, the port rights have lost their scarcity value. It is also arguable that these rights are tradeable because they represent leases handed out by the Western Australian government. If not used by Atlas, they may be forfeited.

Any interest in buying mines is unlikely to be sourced from Australia. To the extent that buyers exist, candidates would be Asian steelmakers like Baosteel, South Korea's Posco or the Taiwanese-owned China Steel Corp. If Atlas can't sell assets quickly, it runs the risk of being in a queue along with other small producers, as the low iron ore price will probably flush out plenty of mines owned by other junior producers looking for a financial lifeline.

The largest of these, Fortescue, doesn't have a big debt repayment due until 2019 but its attempts to refinance bonds last month were unsuccessful.

There is broad agreement among analysts that Fortescue will seek to sell a minority interest in mines to ease the pressure on its stretched balance sheet.

Its larger mines would present a more attractive option for a longer-term large investor.

Meanwhile, the swag of second-tier producers in Australia, including Mt Gibson Iron, BC Iron, Grange Resources and Flinders Mines, will be watching the fate of Atlas with concern.

Grange Resources and Mt Gibson have a cash buffer, which will be gradually eroded if the iron ore price doesn't recover. But it provides them with some short-term cushioning.

BC Iron will be interesting to watch because its major shareholder, Kerry Stokes, could provide it with capital to see it through the downturn.

All will be cursing the iron ore giants, BHP Billiton, Vale and Rio Tinto, whose flooding of the market with capacity is viewed as being primarily responsible for the massive plunge in the iron ore price.

The big boys maintain that at these prices it makes more sense for them to add supply despite the fact their profits are falling.

At the very least, a collapse of any of the second-tier suppliers will place them under some public relations pressure. But it won't be enough to divert them from their course.