A man wearing a protective mask, amid the coronavirus disease (COVID-19) outbreak, walks past an electronic board displaying graphs (top) of Nikkei index outside a brokerage in Tokyo, Japan, March 10, 2022. REUTERS/Kim Kyung-Hoon
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LONDON, March 28 (Reuters) – Oil prices slid on Monday as a coronavirus lockdown in Shanghai fueled worries about weak demand, while the yen’s stomach-churning descent continued as the Bank of Japan stood in the way of higher yields.
World stocks were largely flat, holding their ground in the face of another brutal selloff in major bond markets.
Ten-year U.S. Treasury yields pushed decisively above the 2.5%-marker for the first time since 2019, two-year bond yields in the Netherlands and Belgium turned positive for the first time since 2014 and even Japanese yields defied central bank intervention to hit fresh six-year highs.
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The other eye-popping move came from the yen, which slid almost 1.5%.
China’s financial hub of 26 million people meanwhile told all firms to suspend manufacturing or have people work remotely in a two-stage lockdown over nine days. read more
The spread of restrictions in the world’s biggest oil importer saw Brent skid $4.35 to $116.33, while U.S. crude fell $4.5 or 4% to $109.38.
Although Chinese blue chips (.CSI300) shed 0.6% and Japan’s Nikkei (.N225) lost 0.7%, and U.S. stock futures eased , , weaker oil prices cheered European shares which were broadly firmer (.STOXX).
MSCI’s world stock index was flat, (.MIAPJ0000PUS), resilient in the face of a radically more hawkish Federal Reserve and surging bond yields.
Risk sentiment was helped by hopes of progress in Russian-Ukranian peace talks to be held in Turkey this week after President Volodymyr Zelenskiy said Ukraine was prepared to discuss adopting a neutral status as part of a deal.{nL2N2VU0EH]
“Sentiment has been surprisingly resilient in stock markets, which are buying positive headlines from the war in Ukraine,” said Jan von Gerich, chief analyst at Nordea.
“The repricing that continues at the short end of the U.S. yield curve is taking place really fast and without any consequences for Wall Street at the moment.”
Citi last week forecast 275 basis points of Federal Reserve tightening this year including half-point hikes in May, June, July and September.
YIELD SURGE
Expectations that the Fed could push harder and faster to tame inflation running at four-decade highs continued to batter sovereign bond markets.
Two-year Treasury yields were up around 10 basis points in London trade, having hit their highest levels since early 2019 at 2.41% . Ten-year yields also rose to new highs above 2.5% .
And one measure of the U.S. bond yield curve — the gap between five and 30-year Treasury yields — inverted for the first time since 2006 in a sign that recession risks are increasingly being priced in .
Timothy Graf, State Street’s head of EMEA macro strategy, said selling bonds felt like “the path of least resistance right now.”
“The Fed’s given no sign it will slow down, if anything they have ratcheted up the hawkish guidance,” he added.
Euro zone bond markets continued their move into positive-yield territory, while money market pricing suggested investors were now anticipating 60 bps worth of rate hikes from the European Central Bank by year-end versus 50 bps last week.
Australia’s 3-year bond yield rose to 2.386% , its highest level since 2014.
Japan’s 10-year government bond rose to a fresh six-year high of 0.25% , reaching the upper limit of the Bank of Japan’s policy band even after the central bank stepped into the market in efforts to rein it in.
The BOJ reinforced its super-loose policy by offering to buy as many bonds as needed to keep 10-year yields under 0.25%.
That saw the dollar rise to its highest since August 2015 at 123.82 yen , giving it a gain of over 7% for the month. Likewise, the resource-rich Australian dollar has climbed more than 10% this month to reach 93.20 yen .
The euro has lost about 2.3% on the dollar in the same period, but at $1.0954 is some way above the recent two-year trough of $1.0804.
In commodity markets, gold softened to $1,931 an ounce , down about 1.3%.
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Reporting by Dhara Ranasinghe, Editing by William Maclean
Our Standards: The Thomson Reuters Trust Principles.
HONG KONG/TOKYO, March 28 (Reuters) – The Japanese yen slipped nearly 1% to a six-year low on Monday, after the Bank of Japan intervened to stop government bond yields from rising above its key target, while rising U.S. yields pushed the dollar higher against other currencies too.
The BOJ, which has repeatedly said it is committed to keeping monetary policy loose, on Monday made two offers to buy an unlimited amount of government bonds with maturities of more than five years and up to 10 years. The central bank is aiming to stop rising global interest rates from pushing up Japanese yields.
The dollar climbed roughly 0.95% to 123.25 yen, its highest since December 2015. It rallied over 7% so far in March, its biggest monthly gain in over five years.
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“The market sees monetary policy divergence between the U.S. and Japan as the key driver of dollar-yen, so in contrast to the hawkish Fed comments recently, the (BOJ’s action) gives the impression that the BOJ remains dovish, and that’s leading to a higher dollar-yen,” said Shinichiro Kadota, senior currency strategist at Barclays in Tokyo.
“I think the risk is still to the upside in the near term, especially if this monetary policy divergence story stays intact. But the speed has been quite fast and it does seem a little overheated, so if we see any contrary headlines, we could see some correction as well,” he added.
The 10-year Treasuries yield was last 2.5567%, its highest since May 2019, and up 6.5 basis points on the day, as traders position themselves for an aggressive series of rate hikes from the U.S. Federal Reserve.
The two year yield was 2.412%, its highest since April 2019, with these higher rates underpinning the dollar. The greenback index against a basket of major rivals advanced 0.38% to 99.194.
The euro slid 0.27% to $1.0950 and sterling lost 0.36% to $1.3150.
“We expect that the euro will remain heavy this week. The balance of risks suggests EUR/USD may test 1.0800 in coming weeks,” said CBA analysts in a note.
Inflation figures from major European economies and the eurozone are due from Wednesday, which could also affect the direction of the euro.
Also potentially driving the dollar this week is Friday’s non farm payroll data in the U.S., though given the market is already positioned for an aggressive pace of rate hikes this year, its effect could be muted say analysts.
The Aussie dollar bucked the trend however, inching higher to $0.7513 to hold near last week’s four-month high, helped on the day by rising Australian bond yields, as well as the longer term impact of higher commodity prices.
Aussie currency watchers are also looking out to Australia’s budget on Tuesday. Australia’s Treasurer said on Sunday the budget would mark a very significant material improvement to the government’s bottom line.
One possible headwind for the Aussie is the COVID-19 situation in China, after Shanghai said on Sunday it would lockdown the city to carry out COVID-19 testing.
The dollar climbed to a two week high of 6.3986 on the offshore yuan on Monday morning, before paring gains.
In cryptocurrency markets bitcoin was sitting pretty around $46,900 after jumping to as high as $47,766 in early trading, its highest level since early January.
Ether , the world’s second largest cryptocurrency, was at $3,320.
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Reporting by Alun John in Hong Kong and Kevin Buckland in Tokyo; Editing by Shri Navaratnam
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China’s and U.S.’ flags are seen printed on paper in this illustration taken January 27, 2022. REUTERS/Dado Ruvic/Illustration
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SHANGHAI, March 27 (Reuters) – Chinese regulators and their U.S. counterparts are working hard to solve an audit dispute affecting U.S.-listed Chinese firms and want to achieve effective and sustainable cooperation as soon as possible, a state-run newspaper reported on Sunday.
Citing a source close to Chinese regulators, the official China Securities Journal reported that the China Securities Regulatory Commission (CSRC) heard opinions from some U.S.-listed Chinese companies during an online meeting on Sunday.
“Both Chinese and U.S. regulators are fully aware of each other’s concerns, and are moving toward each other, and working hard to find solutions to the issue in order to achieve effective and sustainable cooperation as soon as possible,” the source was cited as saying.
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“This is in the best interests of the capital markets of both countries and global investors.”
CSRC said that the recent talks with U.S. regulators have been efficient, candid, and professional, the newspaper said.
The comments come days after the U.S. public company accounting regulator said that recent media speculation about an imminent deal with China was “premature”, and it remained unclear if the Chinese government would grant the access required by a new U.S. listing law. read more
Washington is demanding complete access to the books of U.S-listed Chinese companies, but Beijing bars foreign inspection of working papers from local accounting firms – a long-simmering auditing dispute that puts hundreds of billions of dollars of U.S. investments at stake. read more
The Hang Seng Tech Index (.HSTECH), which tracks some of China’s biggest tech companies including Alibaba Group Holding Ltd (9988.HK) and Baidu Inc (9888.HK), jumped 3.6% on Monday morning, compared with a 1.3% gain in the benchmark index Hang Seng.
SIGNIFICANT DIFFERENCES
But some analysts and investors remain sceptical that a solution will be found.
“Significant differences exist between the US and Chinese regulators,” Hao Hong, head of research at BOCOM International, wrote on Monday. “Many US-listed Chinese companies will face delisting eventually.”
U.S. regulators require disclosure of government interest in the listed companies, as well as sensitive information and data, while the Chinese government “has been tightening its control on many of China’s biggest and most important companies,” he added.
To avert the delisting risk, New York-based asset manager Krane Funds Advisors said earlier this month that its $4.9 billion KraneShare CSI China Internet ETF aims to convert all Chinese American Depository Receipts (ADRs) in its portfolio into their Hong Kong shares in the coming months.
Chinese regulators have asked some of the country’s U.S.-listed firms, including Alibaba, Baidu and JD.com, to prepare for more audit disclosures as Beijing steps up efforts to ensure they remain listed in New York, Reuters reported last week. read more
The Financial Times and Bloomberg News also reported this month that China’s securities watchdog is weighing a proposal that would allow U.S. regulators to inspect auditors’ working papers for some companies as soon as this year.
CSRC cautioned market participants not to blindly believe in speculation by some media with little knowledge of the details and direction of the talks, as such reports caused unnecessary disturbances to market expectations, the China Securities Journal reported on Sunday.
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Reporting by Shanghai Newsroom
Editing by Raissa Kasolowsky & Simon Cameron-Moore
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A worker holds a nozzle to pump petrol into a vehicle at a fuel station in Mumbai, India, May 21, 2018. REUTERS/Francis Mascarenhas
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Shanghai to lock down as COVID-19 cases spike
OPEC+ to meet on Thursday
More emergency releases of reserves expected
MELBOURNE/TOKYO, March 28 (Reuters) – Oil prices plunged about $4 on Monday as concerns over slower fuel demand in China grew after authorities in Shanghai said they would shut the country’s financial hub for a COVID-19 testing blitz over nine days.
The market kicked off another week of uncertainty, buffeted on one side by the ongoing war between Ukraine and Russia, the world’s second-largest crude exporter, and the expansion of COVID-related lockdowns in China, the world’s largest crude importer. read more
Brent crude futures slid as low as $116.00 a barrel and were trading down $3.88, or 3.2%, at $116.77 at 0131 GMT.
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U.S. West Texas Intermediate (WTI) crude futures hit a low of $109.30 a barrel, and were down $3.92, or 3.4%, at $109.98.
Both benchmark contracts rose 1.4% on Friday, notching their first weekly gains in three weeks, with Brent surging more than 11.5% and WTI climbing 8.8%.
“Shanghai’s lockdown prompted a fresh sell-off from disappointed investors as they expected such a lockdown would be avoided,” said Kazuhiko Saito, chief analyst at Fujitomi Securities Co Ltd.
He added the market had factored in the impact of a missile attack on a Saudi oil distribution facility last Friday.
“Still, as OPEC+ is less likely to raise oil output at a faster pace than the recent months, we expect the oil market to turn bullish again later this week,” he said.
Shanghai’s city government said on Sunday all firms and factories would suspend manufacturing or have people work remotely in a two-stage lockdown over nine days, after the city reported a new daily record for asymptomatic COVID-19 infections. read more
Sapping fuel demand further, public transport, including ride-hailing services, will also be suspended during the lockdown.
On Friday, Yemen’s Houthis said they launched attacks on Saudi energy facilities and the Saudi-led coalition said Aramco’s petroleum products distribution station in Jeddah was hit, causing a fire in two storage tanks but no casualties. read more
The Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, are due to meet on Thursday.
OPEC+ has so far resisted calls from major consuming nations, including the United States, to step up an output boost. The group have been raising output by 400,000 barrels per day (bpd) each month since August to unwind cuts made when the COVID-19 pandemic hit demand.
To help ease tight supply, the United States is considering another release of oil from the Strategic Petroleum Reserve that could be bigger than the sale of 30 million barrels earlier this month, a source said.
“Additional release, however, may cause fears of a shortage of already-lower inventories which will limit further release in the future,” Fujitomi’s Saito said.
Global stockpiles are at their lowest since 2014.
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Editing by Cynthia Osterman and Jacqueline Wong
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A pumpjack is seen at the Sinopec-operated Shengli oil field in Dongying, Shandong province, China January 12, 2017. Picture taken January 12, 2017. REUTERS/Chen Aizhu/File Photo
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BEIJING, March 27 (Reuters) – China Petroleum & Chemical Corp (600028.SS), better known as Sinopec, is planning its highest capital investment in history for 2022 after recording its best profit in a decade, echoing Beijing’s call for energy companies to raise production.
Sinopec expects to spend 198 billion yuan ($31.10 billion) in 2022, up 18% from a year ago, beating the previous record of 181.7 billion yuan set in 2013, according to a company statement filed to the Shanghai Stocks Exchange on Sunday.
It plans to invest 81.5 billion yuan in upstream exploitation, especially the crude oil bases in Shunbei and Tahe fields, and natural gas fields in Sichuan province and the Inner Mongolia region.
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“Looking ahead in 2022, the market demand for refined oil will continued to recover, and demand for natural gas and petrochemical products will keep growing,” Sinopec said in the statement.
It also warned of potential impacts of geopolitical challenges and volatile oil prices on the investment and operation at overseas businesses. But the firm did not name any specific project.
Reuters reported that Sinopec Group had suspended talks for a major petrochemical investment and a gas marketing venture in Russia, heeding a government call for caution as sanctions mount over the invasion of Ukraine. read more
Brent oil prices have gained 52% so far this year and hit as high as $139 a barrel in early March, stoked by fears of supply disruption in the wake of Russia’s invasion of Ukraine.
Sinopec recorded its biggest profit in a decade in 2021 on the back of recovering energy demand and oil price increases in the post-COVID era, with net earnings reaching 71.21 billion yuan.
It plans to produce 281.2 million barrels of crude oil and 12,567 billion cubic feet of natural gas in 2022, up from its output of 279.76 million barrels and 1,199 billion cubic feet in 2021.
Beijing seeks to ensure energy safety in the country amid intensifying geopolitical risks. It wants to keep annual crude oil output at 200 million tonnes and crank up natural gas production to more than 230 billion cubic metres (bcm) by 2025 from 205 bcm in 2021. read more
Crude throughput and production of refined oil products at Sinopec are expected to stay around the same level in 2022 from a year ago, at 258 million tonnes and 147 million tonnes, respectively.
But demand for gasoline and diesel are dented in China as more than 2,000 of daily COVID cases have triggered local authorities to impose stringent travel restrictions while manufacturers suspended operations amid supply chain clogs. read more
($1 = 6.3658 Chinese yuan renminbi)
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Reporting by Muyu Xu and Chen Aizhu. Editing by Gerry Doyle
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Elon Musk attends the opening ceremony of the new Tesla Gigafactory for electric cars in Gruenheide, Germany, March 22, 2022. Patrick Pleul/Pool via REUTERS
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March 27 (Reuters) – Tesla Inc (TSLA.O) Chief Executive Officer Elon Musk is giving “serious thought” to building a new social media platform, the billionaire said in a tweet on Saturday.
Musk was responding to a Twitter user’s question on whether he would consider building a social media platform consisting of an open source algorithm and one that would prioritize free speech, and where propaganda was minimal.
Musk, a prolific user of Twitter himself, has been critical of the social media platform and its policies of late. He has said the company is undermining democracy by failing to adhere to free speech principles.
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His tweet comes a day after he put out a Twitter poll asking users if they believed Twitter adheres to the principle of free speech, to which over 70% voted “no”.
“The consequences of this poll will be important. Please vote carefully,” he said on Friday.
If Musk decides to go ahead with creating a new platform, he would be joining a growing portfolio of technology companies that are positioning themselves as champions of free speech and which hope to draw users who feel their views are suppressed on platforms such as Twitter (TWTR.N), Meta Platform’s (FB.O) Facebook and Alphabet-owned (GOOGL.O) Google’s YouTube. read more
None of the companies, including Donald Trump’s Truth Social, Twitter competitors Gettr and Parler and video site Rumble, have come close to matching the reach and popularity of the mainstream platforms so far.
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Reporting by Jahnavi Nidumolu and Bhargav Acharya in Bengaluru; Editing by Lincoln Feast.
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A woman stands in front of a screen displaying Japan’s Nikkei share average, U.S. and other countries’ stock market indicators outside a brokerage in Tokyo, Japan December 19, 2018. REUTERS/Issei Kato
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LONDON, March 25 (Reuters) – World stocks are headed for a second consecutive week of gains for the first time in 2022 though sentiment was broadly cautious as markets evaluated the economic risks from the Federal Reserve’s policy tightening and Russia’s war in Ukraine.
Technology shares in Hong Kong (.HSTECH) led losers and weighed on the broader market after U.S. regulators said recent media speculation about an imminent deal that would stop hundreds of Chinese companies from being kicked off American stock exchanges was “premature”. read more
Even though global flash PMI data for March this week showed the world economy was broadly resilient, investors have turned increasingly bearish on the economic outlook. Barclays, for example, cut its world economic growth forecast this week to 3.3% while traders have ramped up short bets.
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Global bond markets were still in the grips of one of their worst selloffs in recent memory, while gauges of market volatility threw mixed signals. Nickel , the face of market volatility, climbed 9% on Friday after hitting the 15% daily trading limit in the previous two sessions.
“I think the passing of the quarter end and fiscal year end in Japan next week will give a cleaner read on the resilience of risk assets and currencies to the bear market in bonds and prospect of accelerated Fed tightening in May,” said Kenneth Broux, an FX strategist at Societe Generale in London.
Benchmark U.S. ten-year Treasury yields which have led the broader bond market selloff held at 2.34% on Friday after hitting a near three-year peak of above $2.41% this week. Yields have risen 75 bps in the past two weeks as traders have scrambled to revise their rate hike expectations.
While Treasuries remained on course for one of their worst quarterly routs since at least the early 1970s, the dollar has benefited from the widening interest rate differential story with the Japanese yen briefly plunging to a late 2015 low of 122 yen per dollar.
The broader dollar index took a breather on Friday but was on track for a small weekly gain.
Markets are expecting as many as 190 rate hikes for the remainder of the year after a 25 bps U.S. rate hike last week. Investors are assigning a 88% probability of a 50 bps rate hike in March.
Chicago Fed President Charles Evans was the latest U.S. policymaker to sound more hawkish, saying on Thursday the Fed needs to raise interest rates “in a timely fashion” this year and in 2023 to curb high inflation before it is embedded in U.S. psychology and becomes even harder to get rid of. read more
Demand for safe-haven assets including gold and the Swiss franc remained resilient as the conflict in Ukraine showed no signs of slowing. Ukrainian troops are recapturing towns east of the capital Kyiv and Russian forces who had been trying to seize the city are falling back on their overextended supply lines. read more
Spot gold remained elevated at $1,959 an ounce, steady on the day.
Overnight the three main U.S. stock indexes each rallied more than 1%, as investors snapped up beaten-down shares of chipmakers and big growth names and supported by a fall in oil prices.
Oil continued to slide a little on Friday, as the United States and allies considered releasing more oil from storage to cool markets. Brent crude fell 1.3% to $117.78 per barrel and U.S. crude down 1.6% to $110 a barrel, but prices were still very high by historic standards.
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Reporting by Saikat Chatterjee; additional reporting by Alun John in Hong Kong; Editing by Raissa Kasolowsky
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Russian Rouble coin is seen on a broken glass and displayed on the Russian flag in this illustration taken, February 24, 2022. REUTERS/Dado Ruvic/Illustration/File Photo
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LONDON, March 25 (Reuters) – Russia’s invasion of Ukraine on Feb. 24 sparked sweeping sanctions that ripped the country out of the global financial fabric and sent its economy reeling.
A month on, Russia’s currency has lost a large part of its value and its bonds and stocks have been ejected from indexes. Its people are experiencing economic pain that is likely to last for years to come.
Below are five charts showing how the past month has changed Russia’s economy and its global standing:
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ECONOMIC PAIN
In 2020, Russia was the world’s 11th-largest economy, according to the World Bank. But by the end of this year, it may rank no higher than No. 15, based on the end-February rouble exchange rate, according to Jim O’Neill, the former Goldman Sachs economist who coined the BRIC acronym to describe the four big emerging economies Brazil, Russia, India and China.
Recession looks inevitable. Economists polled by the central bank predicted an 8% contraction this year and for inflation to reach 20%. read more
Forecasts from economists outside Russia are even gloomier. The Institute of International Finance predicts a 15% contraction in 2022, followed by a 3% contraction in 2023.
“Altogether, our projections mean that current developments are set to wipe out the economic gains of roughly fifteen years,” the IIF said in a note.
IIF on Russia GDP
INFLATION BUSTING TURNS TO DUST
Since taking office in 2013, central bank governor Elvira Nabiullina’s biggest triumph was curbing inflation from 17% in 2015 to just above 2% in early-2018. As price pressures rose in the post-pandemic months, she defied industrialists by raising interest rates eight months straight.
Nabiullina also resisted calls in 2014-2015 for capital controls to stem outflows following the annexation of Crimea.
But those achievements have been torn to shreds in less than a month.
Annual price growth has accelerated to 14.5% and should surpass 20%, five times the target. Households’ inflation expectations for the year ahead are above 18%, an 11-year high.
While panic-buying accounts for some of this, rouble weakness may keep price pressures elevated read more .
With Russia’s reserves warchest frozen overseas, Nabiullina was forced to more than double interest rates on Feb. 28 and introduce capital controls. The central bank now expects inflation back at target only in 2024.
Russia inflation
INDEX ELIMINATION
Sanctions are forcing index providers to eject Russia from benchmarks used by investors to funnel billions of dollars into emerging markets.
JPMorgan (.JPMEGDR) and MSCI are among those that have announced they are removing Russia from their bond and stock indexes respectively (.MSCIEF).
Russia’s standing in these indexes had already taken a hit following the first set of Western sanctions in 2014 and then in 2018, following the poisoning of a former Russian spy in Britain and investigations into alleged Russian meddling in the 2016 U.S. elections.
On March 31, Russia’s weighting will be dialled to zero by nearly all major index providers.
Reuters Graphics Reuters Graphics
RATINGS RUPTURE
When Russian troops stormed into Ukraine, their country had a coveted “investment grade” credit rating with the three major agencies S&P Global, Moody’s and Fitch.
That allowed it to borrow relatively cheaply and a sovereign debt default appeared a distant prospect.
In the past four weeks, Russia has suffered the largest cuts ever made to a sovereign credit score. It is now at the bottom of the ratings ladder, flagging an imminent risk of default.
Russia’s credit rating sees largest cut ever seen globally
ROUBLE TROUBLE
A month ago, the rouble’s one-year average exchange rate sat at 74 per dollar. Trading on different platforms showed the ample liquidity and tight bid/ask spreads expected for a major emerging market currency.
All that has changed. With the central bank bereft of a large portion of it hard currency reserves, the rouble plunged to record lows of more than 120 per dollar locally. In offshore trade it fell as low as 160 to the greenback.
As liquidity dried up and bid/ask spreads widened, pricing the rouble has become haphazard. The exchange rate is yet to find a balance on- and offshore.
Reuters Graphics
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Reporting by Karin Strohecker, Sujata Rao, Rodrigo Campos and Marc Jones; Editing by Sam Holmes
Our Standards: The Thomson Reuters Trust Principles.
DETROIT/BEIJING, March 25 (Reuters) – A year ago Tesla dismissed the alternative path of electric car battery swapping as “riddled with problems and not suitable for widescale use”. It seems Beijing disagrees.
In fact, China is pushing hard for swappable batteries for electric vehicles (EVs) as a supplement to regular vehicle charging, with the government throwing its weight behind several companies advancing the technology.
Four companies – automakers Nio and Geely, battery swap developer Aulton and state-owned oil producer Sinopec (600028.SS) – say they plan to establish a total of 24,000 swap stations across the country by 2025, up from about 1,400 today.
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Battery swapping allows drivers to replace depleted packs quickly with fully charged ones, rather than plugging the vehicle into a charging point. Swapping could help mitigate the growing strains placed on power grids as millions of drivers juice up, yet specialists caution it can only take off in a big way if batteries become standardized industry-wide.
If China is successful in making swapping successful on a large scale, though, the shift could undermine the business models of global brands like Tesla, Volkswagen and General Motors, whose EVs are designed for and powered by their own proprietary batteries and, in Tesla’s case, its own charging network.
Even slight changes of fortune in the country can have significant consequences for these carmakers, whose futures rely on achieving success in the world’s largest car market.
The Chinese swapping plans, announced piecemeal in recent weeks and months but not widely known outside the domestic auto sector, are part of Beijing’s broader plan to make 25% of car sales fully electric by 2025, or more than 6 million passenger vehicles based on current forecasts. Estimates vary widely as to how many will have swappable batteries.
The Ministry of Industry and Information (MIIT), a major supporter of battery swapping, did not immediately respond to a request for further comment about China’s battery swapping strategy
Furthermore, big Chinese players are also looking overseas.
Ningde-based CATL (Contemporary Amperex Technology Company Ltd) (300750.SZ), the world’s biggest battery maker, told Reuters it was developing swapping services not only for China, but “to meet the demand of global markets”.
“We are accumulating experience in the Chinese market and at the same time communicating closely with overseas partners. You’ll receive more concrete information soon,” said CATL, which supplies about half of China’s market and more than 30% of the battery cells used in EVs globally.
Nio, among China’s top EV makers, plans to offer U.S. customers battery-swapping services by 2025, the company’s North American head Ganesh Iyer said. It has more than 800 swap stations in China and has just set up its first in Europe.
‘NEVER GOING TO HAPPEN’
Such plans clash with the views expressed by global EV pioneer and leader Tesla in March 2021 when it dismissed the viability of large-scale battery swapping in China. It trialed swapping in the United States years ago and abandoned it.
Industry executives are divided over whether China’s push can overcome the reluctance of European and U.S. automakers to abandon their own battery designs and adopt standardized ones.
“You’ll never ever get carmakers to agree to swappable batteries,” said Andy Palmer, former CEO of Aston Martin and currently head of EV maker Switch Mobility.
John Holland, wireless EV charging company Momentum Dynamics’ commercial director for Europe and the Middle East, said convergence on batteries created a quandary for automakers.
“Then how do you differentiate your product?”
Tesla (TSLA.O), GM (GM.N) and Volkswagen (VOWG_p.DE) say they are not exploring battery swapping right now.
A GM spokesperson told Reuters that swappable batteries “are not part of our strategy at present.”
A VW spokesperson said the company originally considered battery swapping to avoid waiting times at charging stations, but that advances in fast charging and the lower costs of non-swappable batteries had led it to shift focus to the latter.
“Nevertheless, our strategists closely monitor and evaluate the competitive environment and all developments in this area,” the German carmaker said.
A Tesla spokesperson didn’t immediately respond to a request for comment.
Swapping and regular grid-charging both have critics and cheerleaders in a rapidly evolving auto tech arena.
The ease of exchanging batteries in e-scooters has been demonstrated in Asia and Europe, but the challenge is adapting the technology to larger and more complex cars, trucks and vans. See accompanying short story: read more
Concerns about the length of swapping times have also faded, with Nio saying it has automated the process so it takes as little as 90 seconds.
Yet the more familiar grid-charging side has a huge head start, and is bolstered by the fact there’s already billions of dollars’ worth of charging infrastructure built globally.
Automakers are also rolling out EVs with improved batteries that boast longer ranges and shorter charge times, which could make swapping obsolete.
‘BIGGEST GAME IN TOWN’
In China, MIIT released the global auto industry’s first standards for swapping technology last year. They went into effect in November, specifying safety requirements, test methods and inspection rules for EVs with swappable batteries.
The ministry aims to have more than 100,000 battery-swappable vehicles and more than 1,000 swap stations, in total, in 11 cities by 2023; stations in the bigger cities will accommodate both passenger and commercial vehicles, while outlying provincial cities will focus on electric heavy-duty trucks.
Yet a key uncertainty for China’s ambitions is whether enough carmakers adopt standardized batteries, an obstacle that scuttled attempts at battery swapping in the last decade – yet, if overcome, could propel the technology to a viable scale. Read a short history of swappable batteries: read more
There’s a long way to go. Even the swapping option offered to customers by Nio uses the company’s own batteries, thus limiting the service to people driving Nio cars equipped with the company’s proprietary batteries.
CATL, which helped Nio develop swappable batteries, has signed up China’s FAW Motor as the first customer for its new Evogo battery swapping service and expects to extend the service to other Chinese automakers.
CATL wants domestic firms to accept its standard battery design so its stations can service models from multiple brands, according to a person close to the company who declined to be named due to commercial sensitivities, adding that it expected more car brands to adopt its standardized designs.
The company is “the biggest game in town” for EV batteries, said Tu Le, managing director of Sino Auto Insights.
“They can offer a large footprint for swapping stations and a low cost to use those stations,” he said.
Meanwhile, among those Chinese companies building out swap station networks, Shanghai-based Aulton New Energy Automotive Technology has said it is working with automakers to develop standardized batteries, and with Sinopec to install stations at 30,000 Sinopec gas stations in China by 2030.
Aulton didn’t respond to a request for comment.
MAGIC IN AMERICA?
While international carmakers may resist swappable batteries, they are reliant on Chinese sales to fund their costly transition to electric and will have little choice but to adapt to the market there, according to many industry experts.
Furthermore, if Beijing ultimately mandates swappable batteries “and starts saying, ‘okay, the only car you’re allowed to produce is one that meets the standard’ . . . you would have to comply to stay in business” in China, says John Helveston, assistant professor at George Washington University’s School of Engineering.
Some advocates of swapping are looking beyond China.
Battery swapping “is too convenient, too economical and too logical for this not to happen at scale in Europe and the United States,” said Levi Tillemann, head of policy and international business at San Francisco-based battery swap startup Ample.
“It’s a sort of magical thinking to imagine that this is a uniquely Chinese phenomenon,” he added.
Ample, one of just a handful of battery swapping developers outside China, has raised $275 million from investors, including energy companies Shell, Repsol and Eneos, boosting its valuation to $1 billion.
It is running pilot programs with Uber (UBER.N) and car rental startup Sally, and says it is collaborating with several unnamed automakers.
“With a relatively small number of vehicles that are heavily utilized, we can deploy and operate a battery swap system profitably,” Tillemann said. “So fleets are a prime target for us.”
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Reporting by Paul Lienert in Detroit, Nick Carey in London and Norihiko Shirouzu in Beijing; Additional reporting by Victoria Valdersee in Berlin; Editing by Pravin Char
Our Standards: The Thomson Reuters Trust Principles.
Okta logo is displayed in this illustration taken March 22, 2022. REUTERS/Dado Ruvic/Illustration – RC2R7T9UY7RP
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LONDON/WASHINGTON, March 24 (Reuters) – Police in Britain have arrested seven people following a series of hacks by the Lapsus$ hacking group which targeted major firms including Okta Inc (OKTA.O) and Microsoft Corp (MSFT.O), City of London Police said on Thursday.
San Francisco-based Okta Inc, whose authentication services are used by some of the world’s biggest companies to provide access to their networks, said on Tuesday it had been hit by hackers and some customers may have been affected. read more
“The City of London Police has been conducting an investigation with its partners into members of a hacking group,” Detective Inspector Michael O’Sullivan said in an emailed statement in response to a question about the Lapsus$ hacking group.
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The ransom-seeking gang had posted a series of screenshots of Okta’s internal communications on their Telegram channel late on Monday.
“Seven people between the ages of 16 and 21 have been arrested in connection with this investigation and have all been released under investigation,” O’Sullivan said.
News of the digital breach had knocked Okta shares down about 11 percent amid criticism of the digital authentication firm’s slow response to the intrusion. read more
Shares of Okta were trading down 4.8% on Thursday.
City of London Police did not directly name Lapsus$ in its statement. A spokeswoman said none of the seven people arrested had been formally charged, pending investigation.
WHO ARE LAPSUS$?
Last month, Lapsus$ leaked proprietary information about U.S. chipmaker Nvidia Corp (NVDA.O) to the Web. read more
More recently the group has purported to have leaked source code from several big tech firms, including Microsoft, which on Tuesday confirmed that one of its accounts had been compromised.
Lapsus$ have not responded to repeated requests for comment on their Telegram channel and by email.
A teenager living near Oxford, England, is suspected of being behind some of the more notable attacks, Bloomberg News reported on Wednesday.
Reached by phone, the father of the teenager – who cannot be named because they are a minor – declined to comment. Reuters confirmed that cybersecurity researchers investigating Lapsus$ believe the teenager was involved in the group, according to three people familiar with the matter.
In a blog post on Thursday, Unit 42, a research team at Palo Alto Networks, described Lapsus$ as an “attack group” motivated by notoriety rather than financial gain.
Unlike other groups, they do not rely on the deployment of ransomware – malicious software to encrypt their victims’ networks, a hallmark of digital extortionists – and instead manually lay waste to their targets’ networks.
Along with Unit 221b, a separate security consultancy, the Palo Alto researchers said they had identified the “primary actor” behind Lapsus$ in 2021 and had been “assisting law enforcement in their efforts to prosecute this group”.
“The teenager we identified as being in control of Lapsus$ is particularly instrumental,” Allison Nixon, chief research officer at Unit 221b, told Reuters.
“Not just for their leadership role, but for the vital intel they must possess on other members”.
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Reporting by James Pearson in London and Raphael Satter in Washington; Additional reporting by Christopher Bing; Editing by Catherine Evans, Raissa Kasolowsky, Jonathan Oatis and David Gregorio
Our Standards: The Thomson Reuters Trust Principles.
