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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q99x2's picture

So maybe the reason for Jinping's and Putin's visit was to talk over plans with Obama on how they are supposed to attack the US without too many nukes going off.

Controlled demolition bitchez.

RaceToTheBottom's picture

Time to spend more time at the Vancouver house.....

bgilliam83's picture

My bet is they end up 100,000+ more in the military.  We will get to meet them all soon.

Chairman's picture

Perhaps you neglected to read that the PLA is being downsized.

The Ram's picture

Interesting article above on black lung. My grandfather died of black lung in 1947! So much for 'progress'. Few humans are aware of their desperate situation. They think toiling in mines is normal and righteous. Think of all the idiots clamor in to see the pope in NYC! Btw, my grandparents were also 'good catholics'. They thought it was righteous to work in slavery and attend mass on Sunday's. Fuck that.....I am grateful that at least I see how pathetic all of this bull shit is.....better to commit suicide then to work in a coal mine and die a slave!

o r c k's picture

My Grandfather lost a leg in an Alabama coal mine. And then he raised 9 kids on a farm.

o r c k's picture

Oh, the coal co. gave him 40 acres as compensation.  (true story)

Ms No's picture

I am starting to think that no matter what industry or job one has we are all on a big slave ship. One should probably question this work ethic that we all hold as a water mark for being worthy of life.  I have worked really hard in my life and I spent a lot of time measuring myself based on that, it ocurrs to me now that belief is ignorant if not suicidal. 

Now I just see it as a big game and I will pillage the system from every angle that I can as long as I am not hurting others, stealing, misleading people (and I do not consider getting things cheap theft because it isn't and those dumb fucks would have spent their profits on cell phones and cars anyway, not my problem) I am not doing a damn thing wrong.  When I feel the need to contribute to society I will volunteer or pick people who may have potential and try to help them achieve it. 

You can't change anyones life or better anything from a slave ship.  One also has to wonder where this "value" of being a hard working slave came from to begin with. 

general ambivalent's picture

In America and Europe it is called Taylorism and comes from Calvinism. In Soviet Russia it was called Stakhanovism and came from Marxism (I'm not sure if there's some variant of Orthodox Christianity that is comparable to Calvinism, but during the Westernisation phase in the 1800s when Marxism was brought to Russia Calvinism was as well). Zamyatin referred to God in his industrial dystopia as The Well-Doer Taylor, probably to try to avoid censorship.

I agree with you and I find this to be a big problem in the discussions surrounding work and the free shit army. On one side people realise that we live in a tyranny, but on the other they still believe in the work ethic. In reality it should be called an overwork ethic, as once you believe in the inherent value, even saving graces, of work you begin to see work as a sort of Copernican turn, the world comes to revolve around work. Some Russians in the 1910s saw the potential disaster in this mechanised work ethic before it became a cult of industry with Lenin and Stalin. One was Bogdanov, whose "Immortality Day"is an interesting read, and another was Filonov, who refused to sell his art even at the risk of starvation. That is the kind of conviction people must have to face tyranny, not 'If I don't take the job someone else will.'

Ernst Junger gives us the German perspective, he saw that the mechanised world made it impossible for anyone to be an individual. I think he is right, and this raises a problem for so many people who consider themselves individualists, how can you be an individual in a world where nothing is unique, where everything is made of oil and moulded into throwaway form? (Another version of this would be, how can you believe in the value of labour when the world only produces debt? In some way the free shit army are simply the workers of our time, the taylorists or stakhanovites for a world only producing debt.) I bring up these figures because I believe North America and Europe are facing a huge revolution and these were some of the individuals who predicted disastrous outcomes from the revolutions in Russia and Germany. America is in a very similar situation to 1917 Russia and 1929 Germany.

None of this is to say that one should not work, de Tocqueville long ago showed that poverty laws essentially create a permanent class of paupers. And charity is often an act of moral elevation of the self, a perverse form of status in cleansing one's wrongs. That is what the story of Scrooge is after all, the pure capitalist who thinks only of accumulating value will destroy himself as ghosts come to haunt him, and thus only a socialist ritual of charity will cleanse him of his monied sins. I think this suggests the false dichotomy of socialism and capitalism, as capitalism is itself a form of socialism - the question is simply 'how deep?' Of course, communism and fascism were responses to something lacking in the idea of capitalism itself.

This lack, or demand, is most likely tied to labour. As we see in these reactionary systems, they both focused on a return of meaning to labour. For communism it was to create a collective single class of industrialists, the proletariat; and for fascism it was to work towards becoming a collective social body in the state. What is strange is that capitalism already offered these things, they simply were not named. People will no doubt object to this, saying that 'capitalism is simply a series of contracts for the exchange of goods,' and the problem with this is that the idea is in itself a form of moral sanctuary. It allows one to wipe away his identity as a government bureaucrat and establish relations as if it were not about government power at all; or, it is a sanctuary for which the money changers can once again return to the temple. And to go evern further, one might say it is the Emperor standing naked before you and you go about not even knowing that he is naked.

To see the similarities between capitalism (really it is democracy) and the other forms of industrialism one need only look to work ethic and how all aspects of life have become like work. Watching tv and paying with your time for commercials, tracking your data of fitness and social events, constantly relating to your friends and family only through monied exchanges and communication. Even leisure has become work today, and many people in their off hours go off to work in the woods, build furniture, or in some way engage in skilled forms of work.

What is the problem with capitalist, or industrialist, work? It seems to me that it is due to its meaninglessness, and the lack of skill. There is an obvious difference between building your own house, forging a sword, or sewing a pair of shoes, and pushing a box on a conveyor belt, pulling a mould out of a machine and cutting off the injection point, or standing in front of a box punching in numbers all day. If there is no meaning to the work, no skill required from the individual, and no local purpose for the use of materials, then yes, work has become like a slave ship. This will be hard to accept for many. When you put years into believing something there is a point when it becomes impossible to turn against it. Many in the West believe work ethic is a given, a duty. Just as democracy believes in the equality of all to elect representatives, capitalism believes in the equality of all to produce value. In such a scheme people can only ever be masters or slaves, buyers or sellers, producers or consumers. The middle class is largely just a class with a synthesis of the two belief systems. They were traditionally the producers, but also had a taste of what it meant to be a consumer. This allowed them to be slaves with a little taste of how the masters lived. And now that you see the middle class losing its status they have embraced marxist tendencies for a return of their previous capital status. The taste of living with a surplus is what drove the most wasteful orgy of wealth displays in history, largely on useless and meaningless junk. Capitalism eventually succumbed to its nihilist core as all along it was a contradiction of runaway creation and destruction.

What would meaningful work change? If people focused the economy on localised production of necessities then the majority of work would be focused on developing land for food, producing clothes for practical use, and tools meant to retain a stable economy of necessity. And a requirement of skill-based, hands-on work without slaves and masters would prevent the runaway of wealth creation and destruction. I think the only immediate solution to pauperism would be something like how the anarchists in Spain dealt with capitalists who refused collectivisation, they let them keep their land but they would not have access to any surplus or services the collective provided. In a sense, you could opt out - so it wasn;t like the Socialist "From each according to his ability, to each according to her need." This would mean that if you chose not to work you would get some of the excess eft over by the collective, but in times without surplus you would be left to your own fate. Perhaps it is not the best solution but I think it is a necessary step away from the absolute charity of socialism or total depravity of capitalism. After all, the capitalist ethic of total depravity for the paupers was originally developed as a scheme of the monarchist bureaucracy to force paupers to find charity elsewhere. This simply causes socialism to feed and grow somewhere off in the distance. And who knows how far that might be?

DavyRoySixPack's picture

A cleansing of horrific proportions.

kareninca's picture

I've gone to a great deal of effort in life to avoid hard work without freeloading.  I went through the reasoning process that MsNo described early on, and acted on it.  But I don't think that that is really a great answer, either.  Many people do really like to work hard.  They feel better doing it, even if it is pointless work for a crappy employer.  Loads of people like being a hard-working slave since it takes their mind off other things, and they like goal-oriented activies (it's likely genetic) even if the activities and the goals are stupid.  How else can you explain all of the smart people (like Ms. No) who did that for so long, when if they had actually thought about it they could have avoided it?

Ms No's picture

Just more bubble-boom bust.  Whenever I see a boom kickoff I look at it as the shotgun start of a huge economic collapse.  One can never know if they can bail out the carnage after the bubble bursts or how long the bubble will last.  It will be interesting to see if the Chinese are faster learners than the rest of us or if they will fall for it again and again... and again.  

When a bubble begins one should do the opposite of everyone else by living as cheap as possible and maximizing income and profits.  One can always enjoy relaxation and consumerism when the prices are low and there is no work or growth.  Booms are not what they used to be, and maybe they never used to be either, they are catastrophes and occasionally weapons.     

Dre4dwolf's picture

The solution is simple.

1) Fire 50,000 Employees

2) Re-Invest the money you would of spent on employees into plant and equipment to boost productivity

3) Start a new mine somewhere

4) About 2 months later re-hire everyone.

 

Just send 100,000 people on vacation for a few months while you restructure the company so there are actually that many jobs available and production is high enough to where you actually should have that many employees.

 

Then again this company is probably running on Windows 98 and a Pentium II with some guy using a slide - ruler and a compass doing all the administrative work lol, proly even has a rollodex on his desk with thousands of faded illegible numbers, if its "one of those" companies , there is no hope.

 

 

Fahque Imuhnutjahb's picture

Job sharing, like used in Europe, spread the pain around so as not to be a zero sum solution.

exartizo's picture

...looks like our Asian friends are taking a page right out of the Corporate America Playbook to gauge citizen malcontent and to see just how much they can get away with before their people revolt. 

PoasterToaster's picture
PoasterToaster (not verified) Sep 27, 2015 1:12 PM

Someone should stimulate the economy.

Phoenix901210's picture

Another 'black swan' huh.

I can barely keep up!

Got Catalonia on my bookmarks!

PGR88's picture

Send them to Syria to fight ISIS along with Putin.

Apostate2's picture

Just thought to add some visuals of a Dongbei coal mining area.

http://news.qq.com/original/living/l516.html

earleflorida's picture

on the contrary, this coal 'hardlanding' reduction has been on china's environmental agenda for a decade.

it was no surprise except to the propagandized western 'msm' crying wolf of china's economic demise.

no coal production,... no growth? what a fucking joke!!!

china can import iron ore coke and coal from india at a steep discount while retraining fired employees.

lots can be trained in wind power, hydro, alternate green energy evolution.

the question should be[?] whose gonna get hurt the most:  Australia, *Brazil [*BRICs],* South Africa, Canada, and Ukraine [ as if the Ukraine hasn't enough problems already] just to name the 'five-largest[-1] economies hardest hit of many throughout the world!

australia is the most important ally america has except for japan in the pacific.

ps. the japanese people are getting fed-up with the 'GREY's' running the country since 1952!?! the 'nat'l diet' needs to put 'ABE' on a slow-boat to china, and hope he never comes back, or at least finally publically apologizing for japan's overwhelming brutal, genocidal treatment of china since 1937-45 (** 'nanjing massacre & 2nd jap-sino war... plus their participating in america's korean war against the north...) Okinawa would 2nd my!!! opinion

summary: it's all fucking noise

the ussa will go down the toilet sooner than china,... in fact were already half submerged in excrement from the past 50 years of presidential malaise/ malfeasance/ open-treachery punishable by [----- ] or lifetyme imprisonment.  

Amish FinEng's picture

I spoke to someone in Chungdu yesterday. They were pleasantly surprised that the sun was shining, they could see blue skies.

For so many years all you saw was grey. Humans need to be bathed in the unfiltered radiation from the sun. Do not underestimate it's power.

earleflorida's picture

funny to say the least, never mind ironic how quickLie environmental issues can be put to bed forever?

in the late 60's the ussa started to clean up the water by building out a massive infrastructure of 'sewage-treatment-plants' in every small town community, city/ town and metropolitan area in the entire ussa.

long ago i thought about why it had taken so long to endeavor on such a common-sense agenda.

how could we consciously dump solids [used auto, washing/dryer machines, tv's/radio etc.,etc.,], chemical waste, shit & piss, and every unimaginable cancer causing carsinoginic agent into our water ways, without a thought of disasterous consequences for generations to come drinking water.

the horror  *(dumps actually leeching mercury/ chemical/ lead paint) built over known aquifiers being built to this day*

sadly, the ussa [epa] government is the biggest polluter that still hasn't spent a 30% of monies allotted for 'superfund sites' cleanups. please realize that the federal government owns 25%+/+ of all land in the [our] united states?!?

nyc and la, etel. ship barges full of garbage out to sea and dump freely all hospital waste which wash back onto our pristine beaches and shores around the world [basically all large coastal city metropolitan areas have been skirting the laws for decades...WTF! 


henry chucho's picture

The 100,000 Chinese coal miners were "fired" figuratively,not literallly,which means they were actually run through the coal smelter,and converted into charcoal broquets,which should go on sale at your local Wal*Mart in about 2 weeks..

kareninca's picture

So given their respective populations (China 1.3 billion, U.S. 219 million), this would be the equivalent of a U.S. company firing 400,000 people.  Holy cr*p, that has to be socially disruptive.  I thought the Chinese government "didn't allow" the socially disruptive.  I am guessing that almost all of these ex-employees are male, given the industry.

HerrDoktor's picture

I think the US has a population more like 320 million, give or take 15 million illegal aliens

kareninca's picture

Sorry, you are very right, that was a typo.

Actually now I am wondering about the proportion as well.  Would it be the equivalent of 25k U.S.?  Three days on a FODMAP diet and my brain has totally stopped working.

Yen Cross's picture

 That's going to leave a few skid marks in the PBoC Jockey Shorts.

Moccasin's picture

The cost of labor in other sectors of the economy just dropped.

Keyboard Kommando's picture

Is there some way we can blame the Jews?!?

Fahque Imuhnutjahb's picture

I'm sure they'll profit handsomely from the "hod randing"

grunk's picture

You've  got to kill a billion Chinese,

+/-, 

before you replace them with robots.

Right, Mark Zuckerberg?

 

 

VoodooBoy's picture

1 Billion Chinese Vs. 1 Billion Muslims (throw in some Russians to the tune of of 100K protecting their souther flank) = Winning!  My money is on the kickboxing Indonesians to fight north and drive a wedge straight into the heart of China (because that shit can happen).

 

 

Atomizer's picture

As stated days ago, renting out a realtor house so we can scout the viability of investing in Boca Raton or West Palm Beach. 

I guess we have a formula she doesn't know. I'm working off of TMobile as I type, don't buy the DirectTV bundle with AT&T. We ignored their emails in Charleston, SC. 

The realtor called to confirm on home viewings for this week. Spend time in helping her how to fix minor problems. One home investor to another. 

DirectTV didn't integrate one controller. It took me time to reconfigure box to revert to her paid channels. I asked Shannon, did you have Mexicans staying here prior to my arrival. She stated yes, how did you know? Easy, they were downloading premium DVR recorded channels on you account. 

Those's @&¡¿÷%. Then, i taught her about how she is getting fucked over by her weekly pool guy. They just sold her a sauna pool pump that cannot circulate the water to utilize two skimmers. 

In the meantime, Boca Raton is a shady place. Looking at West Palm Beach next. No purchase, learning the market. 

Thirtyseven's picture

Florida?  I've never been to a worse state and I've been to 42 of 'em.

Here's FL in a nutshell:  Heat, Humidity, Mosquitoes & Trailer Parks. People go down there hoping to live thinking it'll be fun, sun and games.  Then they come back up north to actually make a living again.

Atomizer's picture

I forgot. DirectTV and AT&T WiFi sucks donkey dick. Don't even bother purchasing. Unless you enjoy long hours in watching the browser circle go around. I pulled all phones and two laptops off the miserable AT&T bitch. We'll use verizon, sprint, and TMobile to conduct are Internet browsing. Yes, the WIFI connection has be....;-p 

IMF SELF DESTRUCTING TAPE MESSAGE ...

silverer's picture

I guess the Chinese can join the American coal miners ousted by Obummer in a drink beer bi-lingual sing along (somewhere other than the White House, of course).

Thirtyseven's picture

Coal miners are mostly a bunch of overweight luddites who are some combination of too lazy or too stupid to bother learning some truly valuable skill.

Perhaps if they had done so they wouldn't be coal miners (with or without work)  And hey, maybe if some of them learned to code or something they wouldn't necessarily have to leave their homes in Appalachia, which I'll admit is very pretty countryside.  Wouldn't have to look outside their home state for obese cancer ridden wives either.

Beggers don't get to choose.  Neither do Luddites who cling to outdated economic models.

Thirtyseven's picture

Maybe those 100,000 will act just like West Virginia ludites or Kentuckistanis constantly shouting "but but muh coal jurbs" instead of finally deciding to join the 21st century economy and learning some skill that's valuable to the modern world.

(not a popular opinion here, but it's time to move past coal)

ILikeBoats's picture

How many coal miners do you know?  Just wondering, as you seem to feel you know all about them.

DirkDiggler11's picture

You are correct Thirtyseven, uninformed options do tend to be unpopular on ZH.

Kprime's picture

lol,  it's time to move past energy.

roddy6667's picture

A marginal coal company will fold when the price of the commodity drops a little. Beijing shuttered a lot of companies using coal that pollute the air too much. This dropped the alreeady low price. The same thing happened in the gold mining industry. Maybe Beijing could use these people as laborers building the new nuclear power plants in China. 

Tao Macro's picture

The commodity complex crash is a major component of the deflationary spiral we find our selves in.

 

http://taomacro.com/stock-market-crash.html

 

 

message's picture
message (not verified) Sep 28, 2015 2:09 AM

Bad news for Russia as Russian elite thought to replace EU with China for gas & oil export. In result can lose EU and China is no need for energy as its economy slows down.

mendigo's picture

So at their peak their anual profit was around $500/employee?

VoodooBoy's picture

China just doing it's part for Man-Made global warming.  The Chinese/Longway Holding Company (which is nothing more than a few Chinese hardline generals) needs a new PR group to learn how to do it the Western Way: "45,000 US coal miners lose jobs to support Dear Leader's Global Warming effort." "Coal Mines shut down by EPA so Soros can short companies cheap..."  "45,000 coal miners cheered by faithfull communist party chief Dem Socialist as workers can now collect glorious leaders unemployment checks, play video games, study philosophy and eat oxycotin indefinetly."

 

F'in Chinese.