Amidst a challenging economic climate for Polish coal mining, private company PG Silesia announced plans this week to lay off 754 employees – a move coming just weeks before the traditional Barbórka Day, a holiday honoring miners. The announcement follows a period of restructuring and, unexpectedly, a recent profit reported by parent company bumech Group, raising questions about the future of the 100-year-old mine and sparking debate over fair labor practices within the industry.
PG Silesia, a private Polish coal mining company, announced plans for significant layoffs, a move that came as a surprise just weeks before the traditional Barbórka Day celebrations honoring miners.
The announcement follows the release of Bumech Group’s third-quarter results on November 24, which showed an operating profit of over 26 million złoty, a dramatic turnaround from the 104 million złoty loss reported during the same period last year.
“This is the result of consistent restructuring efforts at PG Silesia, radical cost optimization, and diversification of the Group’s activities,” said Andrzej Bukowczyk, Bumech’s Vice President, as quoted by Parkiet. “It demonstrates that our adopted strategy is yielding real results and allows us to build a stable, resilient business model that can withstand market fluctuations.”
However, just three days later, the company’s restructuring manager notified trade unions of preparations for collective dismissals. PG Silesia experienced financial difficulties last year, leading to a liquidity crisis and the initiation of restructuring proceedings by a court on November 27, 2024.
Is There a Gold Bubble? Analyst Says When to Buy the Commodity
Layoffs Possible, But Not Certain
Grzegorz Babij, the chairman of “Solidarność” at PG Silesia, told wnp.pl that the current restructuring proceedings have not delivered the expected improvements in the mine’s performance. As a result, collective dismissals are planned, with a notice sent to union representatives concerning 754 employees – representing the entire workforce.
“A 20-day consultation period is now underway. Notice of termination of employment may be issued starting December 18,” Babij added. He expressed concern that the mine, which has operated for over 100 years, could be shut down.
However, a representative from the Polish Miners’ Trade Union offered a more cautious outlook.
“Collective dismissals may be suspended, or may not happen at all. The ball is in play; this is only the beginning of the statutory procedure,” Mariola Miodońska stated on Radio Bielsko. She recalled a similar situation in 2020 when the mine was owned by Czechs, and no layoffs ultimately occurred.
Marcin Sutkowski, the main shareholder of the Bumech Group, told Radio Bielsko in late November that no decision had been made and that monthly consultations were ongoing.
“After a month, selected individuals may, but are not obligated to, receive termination notices. It could be 754 people, or 54, or even 4. We have a situation where we need to increase production by 40% to remain cost-competitive, and then, despite all the difficulties around us, we will be able to sustain the mine and reach a new seam,” Sutkowski explained.
Bumech Group took control of PG Silesia for 20 million złoty in early 2021. Previously, the mine was managed by Czech Energetický a Průmyslový Holding. Since then, the group has focused on coal mining and trading, as well as providing mine development services and the production, servicing, and repair of mining equipment.
Bumech indicated last year that Silesia is the largest private mine in Poland, accounting for approximately 3% of the country’s energy coal production and 2.3% of total hard coal production in 2022. The company’s financial performance is closely watched as a barometer of the Polish coal industry.
Complaint to Brussels
On November 26, Bumech Group filed a complaint with the European Commission alleging the misuse of state aid. The complaint concerns support mechanisms for companies wholly owned by the State Treasury, which the group claims distort fair market competition.
The contested support mechanism includes the introduction of subsidies that, in practice, constitute a mechanism for covering the difference between production costs and coal sales revenue. Selected companies are continuously subsidized, completely disrupting free market mechanisms as they receive a subsidy higher than the market price of the product.
According to the company, state-owned mining entities do not bear the consequences of unprofitable coal extraction. Furthermore, such actions hinder the free market and lead to “controlling the coal market through the unauthorized use of its market position, relating to both extraction and distribution.” Bumech argues that “mining coal without reducing costs leads to the exclusion of enterprises that do not benefit from subsidies.”
Jakub Szkopek, an analyst at Erste Securities Polska, explained that PG Silesia has faced difficulties for several years. “The years 2022-2023 saw improvements when coal prices soared, but that was an exception. Bumech operates in an environment where it is surrounded by entities supported by the State Treasury. For example, PGG received 5.5 billion złoty in aid. Meanwhile, Bogdanka sells 70-80% of its volume to Enea, its parent company.”
Szkopek also pointed to JSW, which is experiencing liquidity problems. The company is the largest producer of high-quality coking coal in Europe, but reported a loss of over 2 billion złoty in the first half of the year, while employing approximately 30,000 people across the group.
“If necessary, the state will return the solidarity surcharge of 1.6 billion złoty or buy back JSW Coking Coal. Bumech has no choice; the company’s debt is steadily increasing. And the government is unlikely to help them, given the financial problems at JSW, where the capital group employs around 30,000 people,” Szkopek concluded.
Union representatives are protesting the fact that PG Silesia is not eligible for the same protective measures as state-owned entities. In late October, the government approved a draft amendment to the Act on the Functioning of Hard Coal Mining, providing for the voluntary liquidation of mines by companies and extending protection to employees of JSW and Bogdanka.
The ministry stated that the draft provides for the inclusion of employees of not only PGG, Południowy Koncern Węglowy, and Węglokoksu Kraj (as originally planned) but also includes mechanisms allowing employees of other mining companies within the meaning of the Act, namely JSW and LW Bogdanka, to benefit from the support after a decision is made to include these entities in the support system.
The document specifies conditions for eligibility for benefits such as length of service, for miners’ and mechanical processing workers’ leave, at 80% of the pay calculated as for vacation leave, without the obligation to perform work. Lump-sum severance payments are to amount to 170,000 złoty, tax-free.
Miodońska signaled in March in the “Górnik” magazine the lack of protection for employees being laid off from PG Silesia. The then Minister of Industry, Marzena Czarnecka, argued that the mine was private. In Miodońska’s opinion, “this is no obstacle.”
At the same time, Miodońska recalled that the Act of August 2023 on social protection for employees in the power sector and the hard coal mining industry introduced the possibility of benefiting from energy and mining leave. It also introduced one-time severance payments for certain persons employed in these sectors, including limited liability and civil companies, so “employees of private companies in this sector can also benefit from the social package and are doing so.”
“How is it that a warehouse worker or driver in the aforementioned sector can be covered by the package, while our miner from Silesia, who works in hazardous conditions underground, cannot?” Miodońska wondered in an interview for “Górnik.”
Jakub Szkopek emphasizes that difficult times lie ahead for PG Silesia. – If the war in Ukraine ends, the prices of energy resources will fall, because Russia will be able to export again. This is probably why the decision was made to carry out group layoffs and to strongly reduce costs. Bumech has no choice, the company’s debt is steadily increasing. And the government is unlikely to help them, as there is a problem with finances in JSW on the horizon, where the capital group employs around 30,000 people – he concludes.
Union representatives are not giving up. Babij wondered, “what you have to have in your head” to lay off workers just before Barbórka Day and the Christmas holidays. – This is apparently what thanking us for our hard work for the company looks like. It should also be added that we have been offered the possibility of suspending the collective dismissal process if production is increased – he explained to wnp.pl.
We have reached out to the Bumech Group for comment on the future of PG Silesia and are awaiting a response.
