Australian miners are bracing for a tough year with economic powerhouse China cutting its growth target to a 15-year low, reinforcing a gloomy outlook for commodity prices that is hurting smaller players.

The price of iron ore recently fell below US$60 -- a six-year low -- owing to slowing Chinese growth and a supply glut, increasing the squeeze on miners with high costs.

Australia is home to two of the world's resource giants, BHP Billiton and Rio Tinto, and its largest exports are iron ore and coal.

As an unprecedented mining investment boom that has helped the economy avoid recession for more than two decades wanes, a sluggish China -- the country's largest trading partner -- is heaping more pressure on domestic growth and companies.

"What we've seen for Australian miners is it's a reinforcement of the pessimistic outlook that most people have had regarding China's growth and that it's still slowing," Fat Prophets resources analyst David Lennox told AFP.

"That's really been the broad impact across the commodities sector."

Last week, China lowered its 2015 economic growth target to "approximately seven percent", citing "formidable" difficulties for the world's second-largest economy after a decades-long boom.

China is the world's largest manufacturer of crude steel, of which iron ore is a key ingredient. As the economy slows, steel use in construction and infrastructure drops, reducing iron ore demand.

Now smaller miners that thrived as the iron ore price soared, peaking at US$191.70 in February 2011, are struggling and slashing costs.

- Supply glut to persist -

Compounding their plight is the continued increase in iron ore supply from the four major players -- BHP, Rio, Brazil's Vale and Australia's Fortescue -- to maintain their share of exports.

Rio's iron ore chief executive Andrew Harding said Tuesday the miner was not "in a race to the bottom", but that cutting supply or expansion "would not be in the best interests of shareholders nor indeed of our community and the Australian and West Australian governments".

Instead, the brunt of the pain has been experienced by the shareholders of junior miners.

The share prices of Atlas Iron, BC Iron and Mount Gibson Iron have plummeted by between 78 and 90 percent over the past year and saw them fall from the benchmark S&P/ASX200 index this month.

Atlas Iron has since returned to the ASX200, which tracks 200 of the largest Australian-listed companies, but the move highlights its predicament.

"Now we get to the stage where their cost-reduction programmes are highly advanced and the iron ore price keeps on falling, so something has to give," Patersons Securities' research head Rob Brierley said.

The situation for the smaller operators has become so acute that waiting for the price to recover was now not viable, he added.

"So far we've had Territory Iron, Western Desert and Sherwin Iron -- three Northern Territory producers that have stopped. We've had Arrium that have reduced their production by four million tonnes," Brierley said.

"The next ones are the West Australian juniors. I would expect them to rationalise their production, similar to what Arrium have done. It's a fight to the end for market share and it's not going to be Rio Tinto that closes down."

- Mergers amid oil weakness -

A similar set of circumstances has developed in the energy sector, where the oil market has lost about 50 percent of its value since June in a global supply glut, exacerbated by the OPEC cartel's decision not to cut production.

The low prices point to a potential wave of merger and acquisition activity, according to a report by global consultancy A.T. Kearney this month.

"Oil price volatility will put a brake on deals until prices settle... expect significant M&A activity as a response to sustained low oil prices," an unnamed industry executive told A.T. Kearney.

Australia is set to become the world's biggest liquefied natural gas (LNG) producer, with predictions it will overtake Qatar by 2020 as it unlocks reserves to meet Asian demand.

As most LNG is sold at long-term contracts, which is linked to the oil price, the decline has directly impacted local operators including big players Woodside Petroleum, Oil Search and Santos.

"Investors are certainly focusing on companies in terms of their ability to survive a long period of lower oil prices, and the companies have taken action over the last few months to reduce (capital expenditure) plans and to... lower operating costs," UBS energy analyst Nik Burns said.

"Amongst the smaller listed companies, you would expect more 'M' than 'A'. In the fight for survival, there could be an opportunity... for companies to get together and reduce corporate overheads."