Revealed: The Australians Most at Risk if Chinese Property Giant Evergrande Collapses With More Than $400billion of Debt It Can’t Repay

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Revealed: The Australians Most at Risk if Chinese Property Giant Evergrande Collapses With More Than $400billion of Debt It Can’t Repay

By Stephen Johnson

  • Australians who own mining shares most at risk from the collapse of Evergrande
  •  Iron ore miner Fortescue Metals Group has seen its share price plunge in weeks
  • Online broker said the iron ore price could plunge further amid China debt fears 

Australians who own shares in mining companies are most at risk from the possible collapse of Chinese property giant Evergrande.

Iron ore prices last week plunged below $US100 for the first time in 14 months amid fears China’s Communist Party government would let Evergrande fail with debts of more than $400billion.

Since the end of July, the commodity used to make steel has halved from the $US200-a-tonne mark.

Online broker CommSec said uncertainty about Evergrande and China’s cutbacks in steel production to meet climate change targets had caused iron ore prices to plummet.

Senior economist Ryan Felsman said this put Australians at particular risk if they had invested a lot in mining shares.

Australians who own shares in mining companies are most at risk from the possible collapse of Chinese property giant Evergrande (pictured are the headquarters in Shenzhen in southern China)
Australians who own shares in mining companies are most at risk from the possible collapse of Chinese property giant Evergrande (pictured are the headquarters in Shenzhen in southern China)

‘Aussie investors are indirectly exposed to Evergrande through the Chinese property sector’s insatiable demand for iron ore,’ he said.

‘The price of the steel-making ingredient – Australia’s most important export – has already halved from record highs of around US$233 a tonne in May, following China’s clampdown on the property sector and pollution.’

Since July 30, the share price of iron ore miner Fortescue Metals Group has dived by 39 per cent from $26.30 to $15.87.

Shares in diversified miner BHP since then have fallen by 29 per cent from $53.49 to $37.84.

Rio Tinto shares during the same time frame have dropped by 24.5 per cent from $133.42 to $100.67.

Mr Felsman said iron ore prices could fall even further as Evergrande’s collapse hit China’s broader property market.

Iron ore prices last week plunged below $US100 for the first time in 14 months amid fears China's Communist Party government would let Evergrande fail with debts of more than $400billion (pictured is an Evergrande soccer stadium under construction in Guangzhou)
Iron ore prices last week plunged below $US100 for the first time in 14 months amid fears China’s Communist Party government would let Evergrande fail with debts of more than $400billion

‘A downdraught in Chinese property prices would further subdue construction and reduce iron ore demand,’ he said.

‘Of course, a potential Evergrande default would be catastrophic for steel demand and shares of Aussie-listed iron ore producers.’

Evergrande last week missed a deadline to pay $110million worth of interest payments but chairman Hui Ka Yan promised construction activity would resume as bondholders were repaid.

Shares of Evergrande’s electric car unit plunged as much as 26 per cent on Monday after it warned it faced an uncertain future unless it got a swift injection of cash.

Since July 30, the share price of iron ore miner Fortescue Metals Group has dived by 39 per cent from $26.30 to $15.87 (pictured is the iron ore miner's chairman Andrew Forrest, left, doing stretches with Prime Minister Scott Morrison at the Christmas Creek mine in Western Australia's Pilbara region)
Since July 30, the share price of iron ore miner Fortescue Metals Group has dived by 39 per cent from $26.30 to $15.87 (pictured is the iron ore miner’s chairman Andrew Forrest, left, doing stretches with Prime Minister Scott Morrison at the Christmas Creek mine in Western Australia’s Pilbara region)

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