Coal news and updates

In this city of 1.8 million people near the Russian border, hulking factories are collecting dust, and restaurants sit empty in a landscape of half-completed building projects, idled cranes and closed businesses.

 

“I haven’t been paid in three months,” said Hao Xumei, a coal washer who has worked for 30 of her 47 years at Jixi’s Dongshan mine, as a rooster crowed and the smell of sulphur hung in the air. “I don’t want my children to grow up and do this kind of work here.”

 

The struggle of this city, a coal-mining and industrial hub, illustrates the challenge that China faces in trying to buoy its sprawling economy and squeezing growth from lagging areas.

 

Jixi is among the slowest-growing cities in China’s slowest-growing province. In 2013, its economy grew 0.9 per cent, the lowest rate among China’s 288 larger cities. In the first three quarters of 2014, it contracted 3.7 per cent year-on-year, according to government data. The province, Heilongjiang, grew 5.2 per cent in the first three quarters of 2014.

 

The sluggishness has dragged on despite 300 billion yuan (US$50 billion) being funnelled into 65 stimulus projects by Heilongjiang, much of which target Jixi.

 

Jittery investors are looking to the world’s second-largest economy for growth at a time when the Chinese government is attempting a difficult pivot: steering the economy from an old model driven by investment to one geared toward services and consumption. It is trying to boost employment, narrow the wealth gap and extend prosperity to western, central and northeast areas like Jixi.

 

In a surprise move Friday, China’s central bank cut interest rates for the first time in more than two years—a response to signs of sputtering growth, including flat factory activity.

 

Coal-mining centres like Jixi and other resource-dependent cities have been hit particularly hard by the slowdown, from steel-dependent Tangshan near Beijing to iron-ore-rich Linfen in central China and across large parts of the northeast.

 

“The issue for Jixi and a lot of similar places is a very unbalanced, undiversified economy” often tied to natural resources, said China research director Andrew Batson with Gavekal Dragonomics. Wide swathes of the country are in similar straits, he said: “If resources are in recession, you’re in recession and there’s no easy way out.”

 

Jixi was mostly known for ginseng and edible fungus until the centrally planned economy made it a centre of industry. Now, Jixi’s foundation is coal. At the local museum, displays include crystal dishes filled with briquettes and an animal fossil with a red bow through its eye socket.

 

But the companies that were the city’s strength are now weighed down by excess capacity and dated technology.

 

The state-owned Heilongjiang LongMay Mining Holding Group Co., which employs 266,000 workers across the province, is one of the city’s biggest employers with 13 of its 44 mines in the Jixi area. LongMay reported a first-half 3.3 billion yuan loss, nearly double its 1.8 billion yuan loss the previous year.

 

Investment has slowed to a trickle, and businesses from luxury-goods sellers to noodle dives feel the pinch. In Jixi, investments in factories, buildings and other fixed assets declined 30.5 per cent over the 12 months ending in August compared with the year before.

 

The slide in Jixi and in Heilongjiang province overall has frustrated Beijing. In June, Premier Li Keqiang told Heilongjiang Governor Lu Hao and seven other mayors and governors from around the country that they needed to target growth, the official Xinhua News Agency said. In July, Beijing sent inspection teams to laggard regions to root out inefficiency and complacency.

 

Wang Shi , head of the provincial propaganda office declined to comment on growth prospects, while a Jixi official said the city hopes to attract more investors.

 

One of the proposals to turn things around in Jixi involves expanding tourism and organic food production. But the area, gripped by Siberian cold much of the year, is a long way from major markets. Further, some analysts say, the area lacks a robust entrepreneurial culture.

 

Heilongjiang has rolled out subsidized loans for large state companies and irrigation and low-income housing projects in a bid to stimulate growth. Many are recycled from recent provincial industrial reform initiatives, raising questions about how effective they’ll be in jumpstarting near-term growth.

 

Heilongjiang LongMay, the mining company, is in line to receive 3 billion yuan to help it restructure.

 

Like many state-owned resource companies, LongMay has old technology, overcapacity and high costs, and seems more driven by job preservation than profitability, said Thomas Deng, an analyst with consultancy ICIS C1.

 

“Heilongjiang was the first to start the planned economy and is the last to give it up,” said Jiao Fangyi, economics and business dean at Heilongjiang University. “We have great ample natural resources, but the good times are over. It’s like we’re begging for food from a golden bowl.”

 

Former workers of the quietly rusting Jixi Beifang Zhigang Co. Ltd. steel plant said they would like government support. Beifang produced reinforcement bars for the building industry until it closed last year, laying off 3,000 people. Now they farm beans on the lawn in between company dormitories, which are pasted with dozens of notices for apartments for sale.

 

In a lonely property showroom along a road of unfinished building projects, sales agent Han Xueru with Jixi Huachen Development Co. said sometimes a month goes by without a sale. Ms. Han said that over 40 Jixi developers are trying to sell houses in the declining market and that her relative lost 900,000 yuan when one developer fled. “Few projects are selling and more developers are close to running away,” she said.

 

Dozens of banks and appliance and machine makers are suing Beifang for millions of yuan in claims. Officials at Beifang, its parent company and at LongMay couldn’t be reached to comment. The telephone numbers listed on their websites were out of operation.

 

 

Source: http://www.businessspectator.com.au/