Energy & Resources

Jobs for life

Struggling Wisco seeks to reassign workers

An employee works at the Maanshan steel and iron factory in Hefei

Wisco: employs 80,000

When Margaret Thatcher died in April 2013, many blue-collar workers living in Britain’s former industrial heartlands celebrated the demise of a woman they held almost solely responsible for ripping their communities apart during the early 1980s. Over the space of five years, the mothballing of Britain’s coal and steel industries led to the loss of two million manufacturing jobs and unemployment levels that twice hit three million. Many older workers were never able to find a job again after their plant or pit closed down.

Some 35 years later and faced with a similar scenario of falling prices and overcapacity, Wuhan Iron & Steel (Wisco) has adopted a very different approach to dealing with workers who can no longer be productively employed in the group’s core businesses. The world’s fourth largest steel producer is starting to shift them into other jobs instead.

As we previously reported in WiC142, this is not the first time the group has had to think up creative ways to keep its workforce gainfully employed. In 2012, it branched out into pig and poultry farming as well as organic vegetable production as a sideline.

But as reports, the outlook for China’s steel industry has only continued to deteriorate since then, leaving the company facing the same dilemma once more. Its recent results showed that despite recording revenues of Rmb34.5 billion ($5.4 billion) during the first half of the year, net profit fell 9.8% to Rmb521 million.

This works out at just Rmb6,512 of profit for every one of Wisco’s 80,000 employees. The company attributed the decline to falling finished steel prices and the devaluation of the renminbi.

So far, it has found 300 of its workforce new jobs as auxiliary policeman, security staff and in administrative roles at its property management division. Most of those being moved are in the 32-52 age bracket and were formerly frontline machine workers and welders.

The firm’s new chairman Ma Guoqiang was on hand to wish them well as they marched off to their new jobs this month. He assured them that they would receive the same wages and benefits as before.

“Human resources management is a common problem facing state-owned enterprises,” he told the assembled workers. “But if we can make good use of our workforce then they can actively participate in local economic development. This is not only good for their individual development, but also good for Wisco’s future competitive position and represents an important contribution to our society as a whole.”

Wang Guoqing, a director of LGMI Research Centre tells that many of the reassigned workers joined Wisco straight from school in the years of the ‘iron rice bowl’ (when the centrally planned economy prevailed) and today would find it difficult to get jobs elsewhere. Dismissing them would cause problems, he argues. Wisco’s current approach is far more humane.

He also says Wisco’s attitude contrasts sharply with the behaviour of private sector companies, which would have simply let its staff go.

One Wisco employee who has been let go, however, is Ma’s predecssor Deng Qilin. At the end of August, the Communist Party announced that the former chairman was being investigated for disciplinary violations, its euphemism for corruption. His downfall follows the detention this April of deputy general manager Sun Wendong.

Over in Canada, one of Wisco’s international partners has also turned to similarly unusual methods to beat the global metals and mining downturn. Century Iron Mines, in which Wisco owns a 25% interest, says that instead of developing early stage iron ore assets it will start exporting Australian eggs to Hong Kong and China – a move it described as a transition from mining to dining.

Meanwhile China’s surplus steel is causing dislocation further afield. Sky News reports that a 160 year-old mill faces closure in the UK. The steel plant in Teesside has seen prices for its slab steel fall from $500 a tonne to $300 a tonne, owing to a flood of cheap Chinese slab exports. That’s led to hefty losses as it costs the plant $400 per tonne to make its own steel product.

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