China economist warns major miners may collapse in 2016 – by Sue Lannin (Australian Broadcasting Corporation – December 17, 2015)

A prominent China economist has predicted more mining companies could go bankrupt globally in the new year, including major second tier firms, as China’s economy slows down and commodity prices keep falling.

China based economist Andy Xie used to run Morgan Stanley’s economics team in Asia.

He has forecast that iron ore prices will trade between $US30-40 a tonne in 2016, and that means more iron ore miners could go under including in China.

“So what I see is that next year Chinese demand is likely to go down a lot more, like 20 million tonnes,” Mr Xie told the ABC in an interview.

“And exports will rise less, maybe like 2 million tonnes so the whole production will shrink by at least, I believe, 10 million tonnes.

“So the support for any increase in price is not there.” Mr Xie said a lot of mines in China were in dire straits.

“They’ve been kept going by local government support, but local governments are all in financial trouble – they have so much debt,” he said. “So I do see a lot of the mines in China will go under.”

However, Mr Xie does not think that less supply in China will help higher cost Australian miners, such as Atlas Iron, BC Iron and Fortescue Metals, with iron ore prices expected to fall further or remain around the current price of $US38.20 a tonne.

“I think that anybody who is hoping for a turnaround in price will be in deep trouble next year,” he warned.

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