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Jinchuan Group cuts pay as China economy slows

Keywords: Tags  Jinchuan Group, nickel, copper, cobalt, wage cut, Yang Zhiqiang

SHANGHAI — Jinchuan Group, a major Chinese producer of nickel, copper and cobalt, has reduced wages as it copes with difficulties in its markets and a slowdown in China’s economy.

The move, which isn’t unusual in Chinese state-owned companies going through challenging periods, was confirmed by the company.

There was some market speculation that the measures were related to some kind of significant one-off loss, but a company executive denied this. "This (cut) is due to some more profound reasons. After all, the economic situation is not good," he said.

Three-month nickel on the London Metal Exchange, which fell 29 percent from a year-to-date high of $18,665 per tonne in early February to a low of $13,245 in July, settled the official session at $13,830 per tonne Aug. 30.

Jinchuan’s copper unit has suffered difficulties and production shortfalls because of a shortage of scrap, and declared force majeure on some shipments in June.

Chairman Yang Zhiqiang warned in mid-July that the company needed to "strengthen control of operational costs and capital management," adding that it had to deal with high inventories and rising operational risks. The company also should limit mining of low-grade mines to lower average mining costs, he said.

In the cobalt market, the company was said to be actively selling cobalt scrap, which was seen as unusual. "In the past, they never seriously thought about cobalt metal leftover pieces unless they were approached for the stuff. Now, they are actively trying to promote it," one market source told AMM sister publication Metal Bulletin.

A company executive said it was selling the material at only 3,000 to 4,000 yuan ($490 to $654) per tonne lower than its standard cobalt metal. The latest cobalt metal price in China is between 192,000 and 206,000 yuan ($31,375 to $33,662) per tonne, with the Jinchuan brand trading at the high end of the range.

According to several sources, Jinchuan lowered the performance-related part of employees’ salaries in July, with management being paid 60 percent of that portion and other workers 80 percent.

The staff said it was unclear how long the reductions would be in place.

A version of this article was first published in AMM sister publication Metal Bulletin.

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