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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RaceToTheBottom's picture

Yes,:
"walk a hundred miles that way and squat in that field.  Next? "

cowdiddly's picture

China has issues but is'nt going anywhere. Just full press psychops by a crumbling insecure western world being left behind in hopes of slowing down the train and to draw attention away from their own massive incompetence.

Europe has signed its own death warrant, same as the last time and will not make it to the next century in its present form by not remembering its own past.

Once you let the Goths across the Danube because they are running from the Huns and because you will treat them like shit you now have a separate tribe with completely different culture and values behind your own borders that will eventually revolt,form their own tribal communities (check) then mini states within. Next the civil wars then once its obvious how weak you really are Goth King Alaric sacks your modern day Rome. What more do you need to be reminded of before its to late you morons. Better pull your heads out of your collective asses and put out those Mideast fires quick or your done.

Timeline of events? year 376 to yr 410, so I give it about 25yrs

Spiritof42's picture
Spiritof42 (not verified) christiangustafson Sep 27, 2015 9:15 AM

Reminds me of English coal mines at the beginning of the Industrial Revolution. 

China is a major source of rare earth metals. As bad as those pictures look, I believe the mining of rare earth metals exposes workers to chemicals far more toxic than coal dust.

general ambivalent's picture

Mines are generally a disaster waiting to happen no matter the contents.

http://sputniknews.com/latam/20150925/1027497033.html

Chairman's picture

Great photos.  My first time to see where all of our winter smog comes from.

Son of Loki's picture

Reminds me of American cities like Pittsburg, PA and Carbondale, PA in the 1950's. The owners of the coal companies and mayors of these small town are wealthy beyong belief while these coal workers die an early death i smy understanding. Ominous diseases like "Miners Lung" and "Black Lung" usually kill them before they reach 40. Many coal mining cities in the UK like Wigan also used to be pretty bleak.

NoPension's picture

Beth Steel. Ahhh, the good old days.

When a guy, black or white, could drop out of high school, go work hard, and raise a family on one salary.

Where will the Chinese move it too? India? Africa?
Back to us, when we are all decimated. Will work for slave wages.

Hey, didn't we tell the Southern plantation owners "depending on slave labor is not a viable excuse"
But now, that excuse is mainstream with the illegal invaders.

Oldrepublic's picture

Have you read George Orwell's 1937 classic, The Road to Wigan Pier

Never One Roach's picture

When I was in the UK back in the 1980s I lived outside of Wigan. Used to go into town to pub and met some of the local gals there. Very nice young ladies but their local accent was extremely hard to understand their local dialect. In fact, my friend/roommate from Birmingham, UK also could not understand them. I don't know what it's like now but it was a hard-working place back then but the people, most of them were what they call "the working class," were very very friendly and would always treat others to a round or two.

 

Great people. Brings back wonderful memories. I'll have to read the book you mention above.

 

And, "How Green Was My Valley"...oh boy, a real classic with my sweetheart Maureen O'Hara and superb acting you don't see much of anymore.

 

https://www.youtube.com/watch?v=e-kE3CC2uDc

InflammatoryResponse's picture

even the 60's and very early 70's  when I was little flying into Pittsburgh one time, I thought we'd bounce off the smog comiing in for a landing.

 

roadhazard's picture

I  lived in a town with a papermill for about a month one time during the DaZe. When the wind blew in your direction life was ripe. Those people thought that smell was the smell of money.

G.O.O.D's picture

Lewiston, Idaho smells like that 24/7 365. Total shithole ole stinkytown and clarkston wa. is.  in a valley and the smell/smog cant escape.  pumping pollutuion into the clearwater/snake river all for magical digits in a data base. when one looks at what we humans are doing to this planet for digits in the data base, it could well be considered one hunderd precent infvkinsane.

Skiprrrdog's picture

I worked at a gold mine in Alaska.. one time we went into the mine after they had lit off some explosives. One of the other miners said smell that...it smells like money. I thought no, actually it smells like death...

i_call_you_my_base's picture

The guy on that train should really stop smoking.

Clycntct's picture

You don't get it. That's what he uses to scrub his lungs out.

buzzsaw99's picture

As China Daily notes, "Personnel is probably its largest cost," said Deng Shun, an analyst at Shanghai-based energy consultancy ICIS C1 Energy...

Probably? Well, I can see why Deng Shun gets paid well judging by his production of high quality guesswork like that. /s

Spiritof42's picture
Spiritof42 (not verified) Sep 27, 2015 9:06 AM

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.

When a politician makes a promise, expect the opposite. 

Vendetta's picture

It warms my heart that American politicians are so concerned about China's rate of economic growth while they ignore their own nation's woes.

Infinite QE's picture

Mission accomplished. We have destroyed the economies and cultures of the west and polluted the entire planet with the madness we invented in China. Now, as the global economy plunges, world war is the solution. Our agents are fast at work getting the blame spread around so that when the call to arms is sounded, the masses of the unemployed will readily deploy. And we will sit like lords and eat and profit.

- The Elders of Zion

G.O.O.D's picture

"Come here, I will show you the judgment of the great harlot who sits on many waters, with whom the kings of the earth committed acts of immorality, and those who dwell on the earth were made drunk with the wine of her immorality."

 

 on her forehead a name is written, a mystery, "BABYLON THE GREAT, THE MOTHER OF HARLOTS AND OF THE ABOMINATIONS OF THE EARTH"

 

And I saw the woman drunk with the blood of the saints, and with the blood of the witnesses of Jesus.

 

Fallen, fallen is Babylon the great! She has become a dwelling place of demons and a prison of every unclean spirit, and a prison of every unclean and hateful bird. For all the nations have drunk of the wine of the passion of her immorality, and the kings of the earth have committed acts of immorality with her, and the merchants of the earth have become rich by the wealth of her sensuality.

 

Come out of her, my people, so that you will not participate in her sins and receive of her plagues

 

Come, assemble for the great supper of God, so that you may eat the flesh of kings and the flesh of commanders and the flesh of mighty men and the flesh of horses and of those who sit on them and the flesh of all men, both free men and slaves, and small and great.

o r c k's picture

Fear the hateful birds.

ivana's picture

Shovel-ready joba are coming in 3 -2-1 ... ha ha ha

You remember shovel-ready jobs? They "saved the day" :-)

christiangustafson's picture

Because Kondratieff winter.

Chairman's picture

Yes, Kondratieff winter approaches

_ConanTheLibertarian_'s picture

It already started in 2008 or even 2000.

Fahque Imuhnutjahb's picture

Winter is coming.  The white walkers are gonna shove that shovel up our ass.  Please help us Khaleesi!

Ms. Erable's picture

Bullshit is always shovel-ready.

stormsailor's picture

not really, you have to let it dry for a bit or you get the flung poo phenomenon

MsCreant's picture

Real shit has value as compost, or can be dried and burned as fuel. 

If you want real bullshit you have get into FIRE, which they have been gobbling down by the fist fulls. They will outdo us I think. They will not win because none of us is going to win.

On a long enough timeline...

G.O.O.D's picture

Depends on what you consider "winning".

 

What I tell you in the darkness, speak in the light; and what you hear whispered in your ear, proclaim upon the housetops. Do not fear those who kill the body but are unable to kill the soul; but rather fear Him who is able to destroy both soul and body in hell.

The Axe's picture

The Economist estimates China's labor force is currently 1,4 billion...Listen it sucks to be laid off. but ZH never praises anything on the scaleof humanity..it gets old

NoPension's picture

Mexicans got any shovel ready jobs. That's the joke.

robertocarlos's picture

Once you go nuclear, you don't go black.

Peter Pan's picture

I guess the Chinese could always look to establishing a whole lot of bases all over the world like the Americans to take up some of the slack. Come to think of it I think they just offered to send some troops to Syria.....

cossack55's picture

Yes, they are sending 100,000 coal miners to Syria to join the great escape to Euroland.

Ban KKiller's picture

Foxx Conjob is hiring? 

Keyboard Kommando's picture

Chinese are going to flock to Africa by the tens of millions and turn it into a yellow continent!

Son of Loki's picture

That would be a very great improvement.

Anopheles's picture

China and Chinese have been HUGE in Africa the past decade and increasing rapidly.   You simply don't hear about it.

 

 

tarabel's picture

 

 

I hear about it, and most of what I hear is that the Chiense better be pretty good at playing Rorke's Drift in the near future.

Steve556's picture
Steve556 (not verified) Sep 27, 2015 9:20 AM
Those are high cost mines.    Coal production worldwide doubled in a decade.  Its driving price down.   There is no hard landing.   Look at NIke's sales number.   Up 30.  
HungryPorkChop's picture

Nike's are for playin' and chillin' when you're not at work.  Dress shoes and steel toed boots are for working.   How are those type of sales doing?

BTW: Please don't use forced child labor sweat shop manufacturers as a bright point in the economy. 

 

Chairman's picture

Better a child work than starve or be sold into slavery or prostitution.  I appreciated my job as a child.