The "Hard-Landing" Has Arrived: Chinese Coal Company Fires 100,000

Tyler Durden's picture

The global commodity collapse is finally starting to take its toll on what China truly cares about: the employment of the tens of millions of currently employed and soon to be unemployed workers.

On Friday, in a move that would make even Hewlett-Packard's Meg Whitman blush, Harbin-based Heilongjiang Longmay Mining Holding Group, or Longmay Group, the biggest met coal miner in northeast China which has been struggling to reduce massive losses in recent months as a result of the commodity collapse, just confirmed China's "hard-landing" has arrived when it announced on its website it would cut 100,000 jobs or 40% of its entire 240,000-strong labor force.

Impacted by the slump in coal prices, the group saw its loss over January-August surged more than 1.1 billion yuan ($17.2 million) from the year before. In the first half of 2015, the group closed eight coking coal mines most of which had approached the end of their mining lives, due to poor production margins amid bleak sales.

Chaiman of the group Wang Zhikui said the job losses were a way of helping the company "stop bleeding." The heavily-indebted company also plans to sell its non-coal related businesses to help pay off its debts, said Wang. The State-owned mining group has subsidiaries in Jixi, Hegang, Shuangyashan and Qitaihe in Heilongjiang province, which account for about half the region's coal production.

According to China Daily, last year, Longmay launched a management restructuring and cut thousands of jobs to stay profitable, amid the overall industry decline. However, the company still reported around 5 billion yuan ($815 million) in losses.

It has been a dramatic fall from grace for the company, which in 2011 reported 800 million yuan in profit with annual production exceeding 50 million metric tons.

Experts said staff costs remain a major reason for the company's continued heavy losses. That, and the ongoing collapse in met coal prices of course.

Last year its coal production stood at 49 million tons, just 10 percent that of Shenhua Group Corp Ltd, China's biggest coal producer. But Longmay's workforce remains well above that of Shenhua's 214,000 in total.

The announcement came in the midst of Chinese president Xi Jinping's ongoing tour to the United States, where he assured politicians and businessmen that China's economy will achieve the targeted 7% growth in gross domestic product.

It gets worse, especially in a worst case scenario: Longmay also has 180,000 pensioners to take care of, with life-long payments covering pensions and medical insurance, which are also considered a huge financial burden. As China Daily notes, "Personnel is probably its largest cost," said Deng Shun, an analyst at Shanghai-based energy consultancy ICIS C1 Energy.

"Actually many traditional State-owned coal enterprises are facing the same kind of problem. It has become more severe as the industry remains on a downward trend."

Deng also cautioned on the social problems that massive layoffs may cause, suggesting a reduction in welfare or salaries might be a better way to cut back on costs.

The shocking move is a harbinger of more pain for not only the local government-backed and heavily indebted company, with an eventual bankruptcy looking increasingly probable unless met coal prices don't stage a miraculous rebound, but China's entire coal sector, which in recent years has been a source of millions of jobs to China's unskilled labor force.

And as China's commodity bubble bursts, and the fixed-investment surge mean reverts, the coal industry is set to become a source of millions of job losses.

Incidentally, far more than the Chinese stock bubble burst, or even the credit and housing bubble, the implications from mass defaults of coal companies are precisely what is keeping Beijing up at night.

As the WSJ reported in a piece earlier this week, "for decades, an army of migrant workers drove China’s boom times, flocking to its cities to sew T-shirts, assemble iPhones, or build apartment blocks and Olympic stadiums. The arrangement helped millions of poor, rural Chinese join a new consumer class, though many also paid a heavy price.

The paper of record adds:

now, many migrant workers struggle to find their footing in a downshifting economy. As factories run out of money and construction projects turn idle across China, there has been a rise in the last thing Beijing wants to see: unrest."

Because if there is one thing China's politburo simply can not afford right now, is to layer public unrest and civil violence on top of an economy which is already in "hard-landing" move. Forget black - this would be the bloody swan that nobody could "possibly have seen coming."

As for the future of China's unskilled labor industries, the Fifth Element's Jean-Baptiste Emanuel Zorg has a good idea of what's coming.

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knuppel's picture
knuppel (not verified) Sep 27, 2015 8:44 AM

Proportionally its not that much.


Shocker's picture

The Recovery is spreading

Layoff List:


Captain Debtcrash's picture
Captain Debtcrash (not verified) Shocker Sep 27, 2015 8:52 AM

Frankly I don't see great long term central planning that is going to cause the Chinese to teach the west a lesson in the upcoming monetary shift.   Sure they can make what appears to be some smart moves at times, but so too did the soviets.  Central planning is central planning, their rise has been from communism to a form of fascism that has just enough capitalism to be successful. Its not hard to have spectacular growth when you start with the basket case that was china in the 40's- 60's.  

GRDguy's picture

Very good, debtcrash! Now that leads to the next  question. Who financed all of this, why and under what terms?

KnuckleDragger-X's picture

The Chinese leadership is just a new dynasty and will behave like one. they are working under the imperial assumption of "if I say it,it must be true" and they'll play it to the bitter end......

Oldrepublic's picture

How does everyone reading this get hot water every day?

You have an in house heater than warms up the water

When I  lived in Moscow and later in Kiev I had a hard time getting my head around how Soviet central planners did that simple task, everybody had two water pipes, one cold and one hot from a central town unit!!

Chairman's picture

In China we have instant-on hot water heaters powered by coal- fired electrical power plants. 

NoPension's picture

Do all those currently " underutilized" condos have tie ins to functional electric, water and wastewater?
If so, how do these plants operate at say 5-10% load. No plants work that way. NONE.

If not, WTF. They are useless. No electric, water or wastewater, it's not livable.

Nobody seems to be able to answer this very simple, direct question.

It's one, or the other. And it can't be either one. The only correct answer is, there are full capacity plants, sitting idle. And this stuff goes bad, idle.
Or it doesn't exist.

Fahque Imuhnutjahb's picture

Sirry round eye!  Ancient Chinese secret!

Peak Finance's picture

Actually here im the states, when they "turned-off" the big factories in the early 90's, like the old GM plant in Tarrytown, NY, they had a small crew of guys keeping the lights on checking wiring, pipes, showing activity so no kids got in an damaged the place (braking windows and such), and keeping the place just warm enough to prevent damage to buildings and pipes.  They did this in some cases for YEARS until the building / factory was sold or completely demolished. 

I am sure that each of those huge "Ghost City" buildings has a small crew doing the same, and there are street lights and public building and such up and running as well. If the bulidings in China are minimumily heated and humidity-comtrolled to prevent damage, there will always be activity and some load on the grid. 

Fahque Imuhnutjahb's picture

They have ghost maintenance crews.

RockySpears's picture

"No electric, water or wastewater, it's not livable."


We kind of managed it 150 years ago, Faraday, Newton and Julius Caesar seemed to do OK.

BlackVoid's picture

The West is also running on central planning now.

G.O.O.D's picture

I knew this day was coming when the offshoring of jobs began. I told everyone that would listen, all 3 of them, that the day was coming that we in the west would be:

1: tapped out and and tired of collecting cheap chink plastic/junk

2: being the workers producing the cheap chink junk don't make enough to purchase said cheap chink junk, that after we are @ peak junk the joke we call a consumerist based eCONomoney is/willbe/ toast and all those peasants that left the farm to make it big working for foxcon are going to starve and possibly start putting leaders heads on pikes.

Never One Roach's picture

O'Barry is importing over 100,000 refugees so that should hlep our situation, right.

WillyGroper's picture


Medical, Defence, Tech, caught my eye.

This is a knee slappin good guffaw...


Edit: DBK closing their banks in Russia.  Interesting.

Casey Jones's picture

My local Radio Skack shut its doors suddenly last week. I have pondered for years how that zombie store could swing it with a couple of iPod cables sold per day plus maybe a phone sold to some retard who doesn't know any better. Yet across the street someone is building a whole new shopping center full of stupid fucking chains stores--JoAnns Fabrics and Hobby Lobby---WTF. Anyway Radio Shak is the canary in the mine to me.

What the hell is going to happen to all these unused brand new retail areas?

G.O.O.D's picture

Roller derby is making a huge comeback.

RaceToTheBottom's picture

FEMA camps.

They already have the cops running around on Segways....

NoPension's picture

It's the tail end of the bubble. The banks, commercial loan providers are looking for assets. They are desperate. If you can make it look good on paper, they are in.
I build this shit when they can get financing. And it's ALL borrowed.
Apt houses are all the rage. The banks are fighting for them.

Meanwhile..... We have class A space we can't give away.

rubiconsolutions's picture

"My local Radio Skack shut its doors suddenly last week."


Oh my, where will you get the parts to build a crystal radio or tubes to repair your television set?

newdoobie's picture

I used RS to build a power supply for my sons model RR set. The little unit it came with wans't big enough for what we were building. I also bought several 300 in electronic kits that come with plans and parts for all sorts of crap. My kids now can read a resistor and know its resistance, they understand how to read schematics and have a basic understanding of electronics. Last year my son put together his first computer. He is starting to understand the protocols for the internet but unfortunately his computer is soley for gaming :(


Radio Shack wasn't so bad,

Mostly Harmless's picture
Mostly Harmless (not verified) newdoobie Sep 27, 2015 4:46 PM

Those skills will come in handy.  If you want to get him to cut back on the video games, perhaps you could push him toward making and piloting his own drone/radio controlled vehicle?  Doesn't have to be air-born either.

Iam_Silverman's picture

"My kids now can read a resistor and know its resistance, they understand how to read schematics and have a basic understanding of electronics."

If he rebuilds a digital clock, tell him it's a very bad idea to bring it to school.

August's picture

Those were the days. 

You could trouble-shoot the set yourself, and buy what you hoped was the correct replacement tube, or just go whole-hog and call a Televison Repairman.

And our old LaSalle ran great, too!


"....brand new retail areas.?"


We can keep our weed in them.

Lanka's picture

FEMA re-education centers.

InflammatoryResponse's picture

Was just in a Radio shack store last week.  it was just sad.


not much in the way of electronic components/wire.


just plain sad. :(


msmith9962's picture

Groupon letting go of 1,100?  I'm shocked.  I thought my great grandchildren would be benefiting from that company and it's rock solid business plan.

nosam's picture
nosam (not verified) knuppel Sep 27, 2015 9:27 AM

"Proportionally its not that much."

This is the canary in the coal mine.. almost literally. You can bet that plenty of other companies are doing the same .Its just that we havent heard of it.

Lanka's picture

Many of them are just on the payroll because they are friends/relatives of the managers. 

Vendetta's picture

compared to 750,000 layoffs a month in 2008/2009 in the US with 1/4 the population, it is nothing

i_call_you_my_base's picture

Compared to a massive global financial crisis, right. So are you betting this is the only coal company in trouble?

tempo's picture

Take the jobs back to USA, per trump. What a joke, these jobs pay 1/10 of US wages w no benefits or safety considerations.

Newsboy's picture

You have no job. It's necessary for the good of the country and our earth. It's good. Move along now.

J J Pettigrew's picture

Just ONE MORE REASON the FED can't / won't raise rates....

Chinese economy and their employment picture is now in the baliwick of the United States Federal Reserve...

Which now is not just concerned with the United States, to add to the absurdity that it has no RESERVES or that it isnt FEDERAL

nmewn's picture

"On Friday, in a move that would make even Hewlett-Packard's Meg Whitman blush, Harbin-based Heilongjiang Longmay Mining Holding Group, or Longmay Group, the biggest met coal miner in northeast China which has been struggling to reduce massive losses in recent months as a result of the commodity collapse, just confirmed China's "hard-landing" has arrived when it announced on its website it would cut 100,000 jobs or 40% of its entire 240,000-strong labor force."

Arrest all those rumor mongers that are destroying the Chinese stawk market!...lmao!

Escrava Isaura's picture



Nothing to worry.


US financials are stronger. Up over 100% since 2008.


So, they will rescue the world.


I have total confidence on that.



Fahque Imuhnutjahb's picture

They, and the other global players, will OWN the world; or the world will slip the yoke--no in-betweens.

J J Pettigrew's picture

What did Lawrence Welk say..."Start the Bubble Machine"...or was that Ben Bernanke?

I can just hear all the "geniuses"....According to the theories, we did the right thing.

And, may we ask, Whose Theories?

August's picture

Whwn he was starting out, Lawence Welk couldn't read music, and kept getting fired by other bands, so he had to start his own. There's a lesson in there somewhere.

I never cared much for his musical style, but Mr. Welk was a very sharp and funny guy - he did some great interviews.....

Teh Finn's picture
Teh Finn (not verified) Sep 27, 2015 8:53 AM

Turn in your hard hat and report to organ harvesting at once!

wizteknet's picture

Soy-lent green for the rest of the non usable parts.

fowlerja's picture

Just wondering whether the company is going to bring in some job counseling services and help these folks apply for unemployment benefits.