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Business

Biden’s climate agenda has a problem: Not enough workers

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Jan 11 (Reuters) – U.S. clean energy companies are offering better wages and benefits, flying in trainers from overseas, and contemplating ideas like buying roofing and electric repair shops just to hire their workers as firms try to overcome a labor shortage that threatens to derail President Joe Biden’s climate change agenda.

The Inflation Reduction Act, signed into law last year, provides for an estimated $370 billion in solar, wind and electric vehicle subsidies, according to the White House. Starting Jan. 1, American consumers can take advantage of those tax credits to upgrade home heating systems or put solar panels on their roofs. Those investments will create nearly 537,000 jobs a year for a decade, according to an analysis by BW Research commissioned by The Nature Conservancy.

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But with the U.S. unemployment rate at an historic low of 3.5%, companies say they fear they will struggle to fill those jobs, and that plans to transition away from fossil fuels could stall out. Despite layoff announcements and signs of a slowdown elsewhere in the economy, the labor market for clean energy jobs remains tight.

“It feels like a big risk for this expansion. Where are we going to find all the people?” said Abigail Ross Hopper, president of the Solar Energy Industries Association trade group.

The shortage is anticipated to hit especially hard in electric vehicle and battery production and solar panel and home efficiency installations, forcing some of the companies into bold new approaches to find workers.

Korea’s SK Innovation Co Ltd, which makes batteries for Ford Motor Co’s (F.N) F-150 Lightning all-electric pickup truck in Commerce, Georgia, has pumped up pay and benefits as it ramps up its U.S. workforce to 20,000 people by 2025 from 4,000 today.

The battery maker is advertising pay between $20 and $34 an hour, above Georgia’s median hourly wage of $18.43, according to the U.S. Bureau of Labor Statistics. It is also covering 100% life insurance costs and matching retirement plan contributions up to 6.5%, above the national average of 5.6%, according to the Plan Sponsor Council of America. And the company is providing free food on the job.

“Georgia’s talent pool is not really massive. But we are trying to improve some of our policies to better source and retain workers,” said an SK official who declined to be named, citing the sensitivity of the matter.

Georgia state officials said SK’s hiring has been a success considering how quickly production had to ramp up to meet the company’s obligations to automakers.

While national residential solar installer SunPower Corp (SPWR.O) is recruiting aggressively, Chief Executive Peter Faricy said the company is also looking at what he called “crazy ideas” to secure labor – including buying up companies just for their workers.

“I’m not suggesting we will do this, but I want to give you an order of magnitude of what we’re considering. Like, should we acquire a roofing company and make them all solar installers? Do we go buy an electrical company and acquire 100 electricians?” he said.

SunPower also held talks within the last year with panel manufacturer First Solar Inc (FSLR.O) about developing a solar panel that would be easier to install, enabling crews to outfit two homes a day instead of just one, Faricy said.

SunPower’s competitor, Sunrun Inc (RUN.O), is deploying drones to survey roofs ahead of installation, reducing the number of workers required to scale roofs. It is also rewarding top crews with office parties.

“As best you can game-ify the experience for the employee… it just makes the industry more fun, more attractive,” Chris McClellan, Sunrun’s senior vice president of operations, said in an interview.

Offshore wind developer Orsted (ORSTED.CO), a Danish company that is planning to build projects off the East Coast, hopes to fly in employees from projects in the United Kingdom and Asia to help train staff. State reports have indicated that New York and Massachusetts face large offshore wind workforce gaps.

“We’re creating sort of an ecosystem where we don’t just have an offshore wind academy, but really train the trainers of the future,” said Mads Nipper, Orsted’s CEO, told Reuters.

The Biden Administration has repeatedly promised that new green energy jobs would be well-paying union jobs.

But many of those jobs have lagged the fossil fuel industry in pay, according to a 2021 study by BW Research, as clean energy companies have sought to contain costs to compete with entrenched industries. The IRA seeks to address that by tying prevailing wage and apprenticeship requirements to the subsidies.

Those provisions — and the hiring challenges — have put pressure on some employers to use unionized labor.

Learning from its earlier hiring challenges in Europe and Asia, Orsted signed an agreement with North America’s Building Trades Unions to secure workers.

Even Amazon.com Inc (AMZN.O), a company that has been embroiled in disputes with workers trying to organize, has used union labor to build the electric charging infrastructure for its fleet of electric delivery vehicles in Maspeth, Queens, NY.

Amazon did not respond to requests for comment.

Corrine Case, an electrician represented by the International Brotherhood of Electrical Workers, said she was paid $43 an hour to install the charging system at Amazon.

A single mother, Case said she was excited about the job security offered by the rising demand for electricians to install charging stations.

“Our field is constantly changing because of new energy sources and to be a part of that is amazing,” she said.

FREE WORKER TRAINING

In their hunt for workers, solar, wind and electric vehicle companies have expanded programs offering free and subsidized training to military veterans, women and the formerly incarcerated.

SK told Reuters that it has been recruiting at military job fairs and American Legion chapters and collaborating with programs like the Georgia National Guard’s Work for Warriors and the Manufacturing Institute’s Heroes MAKE America.

Some solar companies have tried to recruit veterans, saying the skills learned in military life translate well to the industry.

Utility scale solar developer SOLV Energy, SunPower and Nextracker last year teamed up with nonprofit Solar Energy International to fund a women-only training program for solar installers. More than 30 women attended the week-long course in Colorado.

In October, the nonprofit Solar Hands-On Instructional Network of Excellence (SHINE) teamed up with the Virginia Department of Corrections on a pilot program to train 30 prison inmates and recently incarcerated people in solar panel installation. SHINE’s director David Peterson said the group is discussing expanding the program.

In California, the nonprofit Grid Alternatives has trained 150 inmates at the Madera County jail in solar installation since 2017 and is expanding its program this year to other facilities in the state. Potential employers are more open to hiring the formerly incarcerated once they see they have received some training, Tom Esqueda, the nonprofit’s outreach manager, said.

In Los Angeles, nonprofit Homeboy Industries, which works to rehabilitate former gang members, is using the potential job opportunities for solar panel installers to help recruits for its state-funded jobs program. Homeboy trains 50-60 people a year as solar panel installers.

More than 80% of the people who have gone through the training in the last year have found jobs in solar, according to Jackie Harper, who oversees the program.

“I’m going to be sticking with this,” said Marco Reyes, 28, who went through the program after his release from prison in February and earns $23 an hour as an installer in Valencia, California.

He now plans to train in the electrical end of solar installation, which would bump up his pay.

“Everyone has a chance to move up the ladder into a better position,” he said. “This job to me is a life changer.”

Read more:

Korea’s Hanwha Qcells to invest $2.5 bln in U.S. solar supply chain

U.S. solar installations to fall 23% this year due to China goods ban -report

Reporting by Nichola Groom and Valerie Volcovici; Edited by Richard Valdmanis and Suzanne Goldenberg

Our Standards: The Thomson Reuters Trust Principles.

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Business

Tesla sends Shanghai boss and aides to jumpstart U.S. output

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SHANGHAI/SAN FRANCISCO, Dec 21 (Reuters) – Tesla Inc’s (TSLA.O) China chief Tom Zhu and a team of his reports has been brought in to troubleshoot production issues in the United States, fueling talk among colleagues he is being groomed for a bigger role at a time when Chief Executive Elon Musk has been distracted by Twitter.

Zhu, who heads Tesla’s Asia operations, has been traveling with a team including Shanghai gigafactory manager, Song Gang, to Tesla’s plants in California and Texas, and was there as recently as last week, according to two people with knowledge of the matter. Both asked not to be named because they were not authorized to speak to the media.

Tesla did not respond to written requests for comment from Reuters sent to its Shanghai and global media relations accounts. Musk did not respond to a Reuters’ email seeking comments for the story. Zhu and Song could not be reached for comment.

Under Zhu, Tesla Shanghai rebounded strongly from lockdowns this year to bring Tesla close to its growth target for 2022 of 50% production growth. Analysts expect output to fall short at closer to 45%, based on forecasts for the just-concluding fourth quarter.

Zhu and others made their first trip to the United States for Tesla this year in August, one of the people said, at a time when the company has some key management roles there unfilled.

Among the projects the Shanghai team have worked on is Tesla’s long-delayed Cybertruck, its next new model, a third person said.

Tesla’s Austin plant is ramping up production of the Model Y and readying the Cybertruck. The Fremont plant is preparing to launch a new version of the Model 3, which will start production in Shanghai next year, Reuters has reported.

Some Tesla investors and analysts have voiced concerns about Musk’s distraction following his acquisition of Twitter in October and the depth of the executive bench at the electric-car company.

Bloomberg reported this month that Zhu was helping to run the Austin plant. However, Zhu’s colleagues in Shanghai believe he is in line for a more senior and wider-ranging role at Tesla, the two people said.

A close aide to Zhu in Shanghai circulated a farewell poem for the China boss in recent weeks on social media, anticipating his new assignment, according to the message reviewed by Reuters.

SHANGHAI TEAM ON THE ROAD

At the Austin factory, Chinese engineers were seen by people at the plant working in the area reserved for development of the Cybertruck and batteries, a third person with knowledge of operations there said. Tesla has targeted production of the Cybertruck next year.

At Fremont California, Chinese staff have been working on Model Y underbody assemblies, according to another person with knowledge of their work there.

When Tesla posted a picture on Twitter on Friday to celebrate Austin hitting a new production milestone of 3,000 Model Ys in a week — still less than a third of the weekly output of Shanghai last quarter — Zhu was shown smiling with hundreds of people on the factory floor.

Zhu, who was born in China but now holds a New Zealand passport, is a no-fuss manager who favors Tesla-branded fleece jackets and lives in a government-subsidized apartment a 10-minute drive from the Shanghai Gigafactory, according to people who work with him and his comments to Chinese media.

When Musk sent a memo in early June warning he had a “super bad feeling” about the economy, Shanghai was on track to end the quarter down 36% from the quarter before because of COVID lockdowns, data released later showed.

With help from Shanghai officials, Zhu restarted operations by asking thousands of workers and suppliers to stay at the factory for more than six weeks. Zhu himself opted to stay longer, sleeping at the factory as Musk had in 2018 when Fremont was struggling to ramp production, two people with knowledge of the events told Reuters.

Shanghai, a complex that employs some 20,000 workers, came roaring back in the third quarter, with output of the Model Y and Model 3 up over 70% on the quarter.

Through September, Shanghai accounted for more than half of Tesla’s output.

The plant has excelled in applying cost-saving, factory-floor innovations for Tesla, including the use of massive casting machines to simplify production.

“The manufacturing people who led that push are obvious choices to spread the production gospel into the other new plants,” said Sam Fiorani, who tracks production trends Auto Forecast Solutions.

Tesla board member James Murdoch said last month the company had recently identified a potential successor to Musk without naming the person. Murdoch did not immediately respond to a request for comment.

Reuters has no evidence that Zhu is the possible candidate.

“With Elon Musk’s attention currently being pulled in a number of directions, finding someone to help guide Tesla is important, especially someone with the manufacturing know-how that Tom Zhu has,” Fiorani said.

Some investors are skeptical that Zhu alone could turn things around: “In America, doing business is very, very different than running a factory in China,” Ross Gerber, a Tesla investor and CEO of Gerber Kawasaki Wealth and Investment Management said on Twitter Spaces on Tuesday. “So I think Elon needs to be at Tesla.”

Reporting by Zhang Yan in Shanghai and Hyunjoo Jin in San Francisco; editing by Kevin Krolicki and Daniel Flynn

Our Standards: The Thomson Reuters Trust Principles.



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World

They call it ‘The Hole’: Ukrainians describe horrors of Kherson occupation

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  • Residents describe detention, torture and death in Kherson
  • Nine-month occupation ended on Friday as Russians retreated
  • Among those detained were suspected resistance fighters
  • Russia denies mistreating detainees
  • U.N. officials say both sides have abused prisoners of war

KHERSON, Ukraine, Nov 16 (Reuters) – Residents in Ukraine’s southern city of Kherson call the two-storey police station “The Hole”. Vitalii Serdiuk, a pensioner, said he was lucky to make it out alive.

“I hung on,” the retired medical equipment repairman said as he recounted his ordeal in Russian detention two blocks from where he and his wife live in a tiny Soviet-era apartment.

The green-roofed police building at No. 3, Energy Workers’ Street, was the most notorious of several sites where, according to more than half a dozen locals in the recently recaptured city, people were interrogated and tortured during Russia’s nine-month occupation. Another was a large prison.

Two residents living in an apartment block overlooking the police station courtyard said they saw bodies wrapped in white sheets being carried from the building, stored in a garage and later tossed into refuse trucks to be taken away.

Reuters could not independently verify all of the events described by the Kherson residents.

The Kremlin and Russia’s defence ministry did not immediately respond to questions about Serdiuk’s account or that of others Reuters spoke to in Kherson.

Moscow has rejected allegations of abuse against civilians and soldiers and has accused Ukraine of staging such abuses in places like Bucha.

On Tuesday, the U.N. human rights office said it had found evidence that both sides had tortured prisoners of war, which is classified as a war crime by the International Criminal Court. Russian abuse was “fairly systematic”, a U.N. official said.

As Russian security forces retreat from large swathes of territory in the north, east and south, evidence of abuses is mounting.

Those held in Kherson included people who voiced opposition to Russia’s occupation, residents, like Serdiuk, believed to have information about enemy soldiers’ positions, as well as suspected underground resistance fighters and their associates.

Serdiuk said he was beaten on his legs, back and torso with a truncheon and shocked with electrodes wired to his scrotum by a Russian official demanding to know the whereabouts and unit of his son, a soldier in the Ukrainian army.

“I didn’t tell him anything. ‘I don’t know’ was my only answer,” the 65-year-old said in his apartment, which was lit by a single candle.

‘Remember! Remember! Remember!’ was the constant response.”

‘PURE SADISM’

Grim recollections of life under occupation in Kherson have followed the unbridled joy and relief when Ukrainian soldiers retook the city on Friday after Russian troops withdrew across the Dnipro River.

President Volodymyr Zelenskiy said two days later that investigators had uncovered more than 400 Russian war crimes and found the bodies of both servicemen and civilians in areas of Kherson region freed from Russian occupation.

“I personally saw five bodies taken out,” said Oleh, 20, who lives in an apartment block overlooking the police station, declining to give his last name. “We could see hands hanging from the sheets and we understood these to be corpses.”

Speaking separately, Svytlana Bestanik, 41, who lives in the same block and works at a small store between the building and the station, also recalled seeing prisoners carrying out bodies.

“They would carry dead people out and would throw them in a truck with the garbage,” she said, describing the stench of decomposing bodies in the air. “We were witnessing sadism in its purest form.”

Reuters journalists visited the police station on Tuesday but were prohibited from going beyond the courtyard, rimmed by a razor wire-topped wall, by armed police officers and a soldier who said that investigators were inside collecting evidence.

One officer, who declined to give his name, said that up to 12 detainees were kept in tiny cages, an account corroborated by Serdiuk.

Neighbours recounted hearing screams of men and women coming from the station and said that whenever the Russians emerged, they wore balaclavas concealing all but their eyes.

“They came in the shop every day,” said Bestanik. “I decided not to talk to them. I was too afraid of them.”

RESISTANCE FIGHTERS

Aliona Lapchuk said she and her eldest son fled Kherson in April after a terrifying ordeal at the hands of Russian security personnel on March 27, the last time she saw her husband Vitaliy.

[1/7] Vitalii Serdiuk, 65, who says he was tortured by Russian service members, and his wife Olena speak during an interview with Reuters after Russia’s retreat from Kherson, Ukraine, November 15, 2022. REUTERS/Valentyn Ogirenko

Vitaliy had been an underground resistance fighter since Russian troops seized Kherson on March 2, according to Lapchuk, and she became worried when he did not answer her phone calls.

Soon after, she said, three cars with the Russian “Z” sign painted on them pulled up at her mother’s home where they were living. They brought Vitaliy, who was badly beaten.

The soldiers, who identified themselves as Russian troops, threatened to smash out her teeth when she tried to berate them. They confiscated their mobile phones and laptops, she said, and then discovered weapons in the basement.

They beat her husband in the basement savagely before dragging him out.

“He didn’t walk out of the basement; they dragged him out. They broke through his cheek bone,” she said, sobbing, in the village of Krasne, some 100 km (60 miles) west of Kherson.

Lapchuk and her eldest son, Andriy, were hooded and taken to the police station at 4, Lutheran Street, in Kherson where she could hear her husband being interrogated through a wall, she said. She and Andriy were later released.

After leaving Kherson, Lapchuk wrote to everyone she could think of to try and find her husband.

On June 9, she said she got a message from a pathologist who told her to call the next day. She knew immediately Vitaliy was dead.

His body had been found floating in a river, she said, showing photographs taken by a pathologist in which a birth mark on his shoulder could be seen.

Lapchuk said she paid for Vitaliy to be buried and has yet to see the grave.

She is convinced her husband was betrayed to the Russians by someone very close to them.

‘THE HOLE’

Ruslan, 52, who runs a beer store opposite the police station where Serdiuk was held, said that at the beginning of the occupation, Russian-made Ural trucks would pull up daily before the grey front door.

Detainees, he said, would be hurled from the back, their hands bound and heads covered by bags.

“This place was called ‘Yama’ (The Hole),” he said.

Serhii Polako, 48, a trader who lives across the street from the station, echoed Ruslan’s account.

He said that several weeks into the occupation, Russian national guard troops deployed at the site were replaced by men driving vehicles embossed with the letter “V”, and that was when the screams started.

“If there is a hell on earth, it was there,” he said.

About two weeks ago, he said, the Russians freed those being kept in the station in apparent preparation for their withdrawal.

“All of a sudden, they emptied the place, and we understood something was happening,” he told Reuters.

Serdiuk believes he was betrayed by an informant as the father of a Ukrainian serviceman.

He said Russian security personnel handcuffed him, put a bag over his head, forced him to bend at the waist and frog-marched him into a vehicle.

At the station, he was put in a cell so cramped that the occupants could not move while lying down. On some days, prisoners received only one meal.

The following day, he was hooded, his hands bound, and taken down to a cellar room. The interrogation and torture lasted about 90 minutes, he said.

His Russian interrogator knew all of his details and those of his family, and said that unless he cooperated, he would have his wife arrested and telephone his son so he could hear both of them screaming under torture, Serdiuk said.

Two days later, he was released without explanation. His wife found him outside the shop in which Bestanik works, virtually unable to walk.

Tom Balmforth reported from Krasne, Ukraine; Editing by Mike Collett-White and Philippa Fletcher

Our Standards: The Thomson Reuters Trust Principles.

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World

Exclusive: Russian oil cap doubts spur insurer fears of ships left at sea

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LONDON/BRUSSELS, Nov 10 (Reuters) – Oil-laden tankers risk being left languishing at sea if insurers do not urgently get clarity on an unfinished G7 and European Union plan to cap the price of Russian crude, two senior industry executives told Reuters.

The Group of Seven (G7), which includes the United States, Britain, Germany and France, agreed in September to enforce a low price on sales of Russian oil.

U.S. officials said the move, which is due to start on Dec. 5, was aimed at allowing it to continue to flow, heading off a potential price shock after total EU bans were ratified in June.

And with just three weeks to go, time is running out to fully convince the shipping services industry it will work.

Concerns are centred around a scenario in which insurers discover that oil in transit at sea, which was believed to have been sold below the price cap, was in fact sold above it.

This would trigger the withdrawal of insurance cover as well as a refusal by buyers to accept delivery, leading to financial and logistical headaches and risking environmental dangers.

“If the time is too short, I think everyone will have a Plan B to de-risk, terminate, stay away, not maybe conclude any new contracts until there is some clarity,” said George Voloshin, Global Anti-Financial Crime Expert at ACAMS, the Association of Certified Anti-Money Laundering Specialists which consults with oil industry bankers, traders and insurers.

If insurance was withdrawn mid-voyage, buyers and traders would have to figure out what to do with a stranded cargo potentially exposed to sanctions, complicating a strategy to deprive Russia of funds over its invasion of Ukraine.

“It will probably be quite messy,” Voloshin said.

A European Commission official said the EU is aware that much more additional detail will be needed as time runs short for businesses to learn about their obligations, but that the issue must be dealt with at the G7 level.

The official spoke to Reuters on condition of anonymity because they are not authorized to speak about the matter.

U.S. State Department Ambassador James O’Brien, who heads the coordination of sanctions against Russia, said G7 countries will be ready with all the operational details and that technical talks were underway on pricing and governance.

‘SANCTION ISLANDS’

But if information gaps remain on the cap, it is possible oil-filled tankers could be left without insurance and marooned near ports, posing a major safety issue for nearby countries in the event of a spill, as well as any cleanup costs.

“In that situation, the vessel will go off risk and financial and technical services will be withdrawn and no one is going to take delivery of the cargo,” Mike Salthouse, head of claims at British-based global ship insurer North, told Reuters.

“This would be a bad development as no one will want uninsured ships sitting off coasts,” he added.

Salthouse said an owner of a ship which was potentially not earning anything for many months “will price that into any decision they make about carrying cargo in the future”, adding that this was likely to act as a disincentive.

“If that happens too often, it will run contrary to what the EU/G7 Coalition is trying to achieve.”

Although the EU ratified the price cap last month, insurers point to still unpublished legal details which must align with incomplete but more detailed U.S. Treasury guidance, especially over guarantees that insurers will not face surprise obstacles in the middle of a ship’s voyage.

“We need regulation in the G7 community which is similar, that is, the U.S. – where we have interim guidelines in the meantime – the U.K. and the EU,” said Lars Lange, secretary general of the International Union of Marine Insurance (IUMI).

“We fear that if we get different regulations from these three ‘sanction islands’ we will struggle to comply with all at the same time,” Lange said, adding that any vessels which are spurned by ports pose serious consequences.

The IUMI and the separate International Group insurance association have let G7 and EU governments know that their guidelines must include guarantees that the proof that a Russian cargo was sold in line with the cap is all that an owner is required to check before agreeing to load and carry the cargo.

Editing by Alexander Smith

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From Russia with cash: Georgia booms as Russians flee Putin’s war

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  • At least 112,000 Russians move to neighbour Georgia
  • Georgia set to be one of fastest-growing economies
  • Some locals being priced out of housing, education
  • Economy could face hard landing if newcomers leave

TBILISI, Nov 5 (Reuters) – As war chokes Europe, a small nation wedged beneath Russia is enjoying an unexpected economic boom.

Georgia is on course to become one of the world’s fastest-growing economies this year following a dramatic influx of more than 100,000 Russians since Moscow’s invasion of Ukraine and Vladimir Putin’s mobilisation drive to drum up war recruits.

As much of the globe teeters towards recession, this country of 3.7 million people bordering the Black Sea is expected to record a vigorous 10% growth in economic output for 2022 amid a consumption-led boom, according to international institutions.

That would see the modest $19 billion economy, well known in the region for its mountains, forests and wine valleys, outpace supercharged emerging markets such as Vietnam and oil exporters such as Kuwait buoyed by high crude prices.

“On the economic side, Georgia is doing very well,” Vakhtang Butskhrikidze, CEO of the country’s largest bank TBC, told Reuters in an interview at its Tbilisi headquarters.

“There’s some kind of boom,” he added. “All industries are doing very well from micros up to corporates. I can’t think of any industry which this year has problems.”

At least 112,000 Russians have emigrated to Georgia this year, border-crossing statistics show. A first large wave of 43,000 arrived after Russia invaded Ukraine on Feb. 24 and Putin moved to quash opposition to the war at home, according to the Georgia government, with a second wave coming after Putin announced the nationwide mobilisation drive in late September.

Georgia’s economic boom – whether short-lived or not – has confounded many experts who saw dire consequences from the war for the ex-Soviet republic, whose economic fortunes are closely tied to its larger neighbour through exports and tourists.

The European Bank for Reconstruction and Development (EBRD), for example, predicted in March the Ukraine conflict would deal a major blow to the Georgian economy. Likewise the World Bank forecast in April that the country’s growth for 2022 would drop to 2.5% from an initial 5.5%.

“Despite all expectations that we had … that this war on Ukraine will have significant negative implications on the Georgian economy, so far we don’t see materialization of these risks,” said Dimitar Bogov, the EBRD’s lead economist for Eastern Europe and the Caucasus.

“On the contrary, we see the Georgian economy growing quite well this year, double digits.”

Yet the stellar growth is not benefiting everyone, with the arrival of tens of thousands of Russians, many tech professionals with plenty of cash, driving up prices and squeezing some Georgians out of parts of the economy such as the housing rental market and education.

Business leaders also worry that the country could face a hard landing should the war end and Russians return home.

TO GEORGIA WITH $1 BILLION

Georgia itself fought a short war with Russia in 2008 over South Ossetia and Abkhazia, territories controlled by Russian-backed separatists.

Now, though, Georgia’s economy is reaping the benefits of its proximity to the superpower – the two share a land border crossing – and a liberal immigration policy which lets Russians and people from many other countries live, work and set up businesses in the country without needing a visa.

Furthermore, those fleeing Russia’s war are accompanied by a wave of money.

Between April and September, Russians transferred more than $1 billion to Georgia via banks or money-transfer services, five times higher than during the same months of 2021, according to the Georgian central bank.

That inflow has helped push the Georgian Lari to its strongest level in three years.

Roughly half of the Russian arrivals are from the tech sector, according to TBC’s CEO Butskhrikidze and local media outlets, chiming with surveys and estimates from industry figures in Russia that pointed to an exodus of tens of thousands of highly-mobile IT workers after the invasion of Ukraine.

“These are high-end people, rich people … coming to Georgia with some business ideas and increasing consumption drastically,” said Davit Keshelava, senior researcher at the International School of Economics at Tbilisi State University (ISET).

“We expected the war to have a lot of negative impacts,” he added. “But it turned out quite different. It turned out to be positive.”

NO ROOMS IN TBILISI

Nowhere is the impact of the new arrivals more evident than in the capital’s housing rental market, where increased demand is aggravating tensions.

Rent in Tbilisi is up 75% this year, according to an analysis by TBC bank, and some low-earners and students are finding themselves at the centre of what activists say is a growing housing crisis.

Georgian Nana Shonia, 19, agreed a two-year deal for a city centre apartment at $150 a month, just weeks before Russia invaded. In July, her landlord kicked her out, forcing her to move to a rough neighbourhood on the edge of the city.

“It used to take me 10 minutes to get to work. Now it’s a minimum of 40, I have to take a bus and the metro and often get stuck in traffic jams,” she said, attributing the change in market dynamics to the surge of newcomers.

Helen Jose, a 21-year-old medical student from India, has been crashing at her friend’s for a month after her rent doubled over the summer break.

“Before it was very easy to find an apartment. But so many of my friends have been told to leave, because there are Russians willing to pay more than us,” she said.

University figures have also reported significant numbers of students delaying their studies in Tbilisi because they can’t afford accommodation in the city, Keshelava at ISET said.

‘THE CRISIS COULD HIT’

TBC’s Butskhrikidze said he saw potential in the new arrivals to fill skills gaps in the Georgian economy.

“They are very young, technology-educated and have knowledge – for us and for other Georgian companies this is quite a useful opportunity,” he said.

“A key challenge for us is technology. And unfortunately on that side we are competing with high-tech companies in the United States and Europe,” he added. “To have a quick win, these migrants are very helpful.”

Nonetheless, economists and businesses remain concerned about longer-term negative effects from the war, and what might happen should the Russians return home.

“We don’t build our future plans on the newcomers,” said Shio Khetsuriani, the CEO of Archi, one of Georgia’s largest real-estate development companies.

Even with rental prices surging, Khetsuriani says development companies are not keen to over-invest in the housing market, especially with prices for materials and equipment increasing. While landlords may be cashing in on surging rents, profit margins for apartment sales have barely shifted, he said.

Economists also caution the boom may not last, and are encouraging the Georgian government to use healthy tax revenues to pay down debt and build up foreign currency reserves while they can.

“We have to be aware that all these factors that are driving growth this year are temporary, and it does not guarantee sustainable growth in the following years, so therefore caution is needed,” said Bogov at the EBRD.

“Uncertainty is still there and the crisis could hit Georgia with some delay.”

Reporting by Jake Cordell; additional reporting by David Chkhikvishvili; editing by Guy Faulconbridge and Pravin Char

Our Standards: The Thomson Reuters Trust Principles.

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Business

Europe’s debt market strains force some governments to rework trading rules

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Oct 31 (Reuters) – Some euro zone countries have eased rules for the banks that manage the trading of their government debt to help them cope with some of the most challenging market conditions in years, officials told Reuters.

Out of 11 major euro area debt agencies Reuters contacted, officials in the Netherlands and Belgium told Reuters they have loosened various market-making obligations dictating how actively these banks should trade their debt.

France, Spain and Finland said their rules are already structured to automatically take account of market tensions. Germany and Austria said they do not set such rules.

As the European Central Bank unwinds years of buying the region’s debt, while the war in Ukraine, an energy shock and turmoil in Britain are making investors wary of loading up on government bonds, debt managers are adjusting to a less liquid, more volatile market.

That in turn, could raise borrowing costs for governments, already squeezed by climbing interest rates and energy-related spending, and bring more uncertainty for institutions, such as pension funds, which seek in government debt safety and stability.

Euro zone government debt bid-ask spreads, the difference between what buyers are offering and sellers are willing to accept and a measure of how smooth the trading is, have risen up to four-fold since the summer of 2021, data compiled by MarketAxess (MKTX.O) for Reuters showed. The data tracked German, Italian, French, Spanish and Dutch bonds, markets which account for the vast majority of euro zone debt with nearly 8 trillion euros outstanding.

Bond bid-ask spreads soar

LOOSENED OBLIGATIONS

Wider spreads mean more volatility and higher transaction costs. So governments expect, and some formally require their primary dealers – banks that buy government debt at auctions and then sell to investors and manage its trading – to keep those tight.

In markets with formal requirements, they also face other “quoting obligations” to ensure the best possible liquidity. Those obligations have been loosened in some countries to account for heightened market stress.

Jaap Teerhuis, head of dealing room at the Dutch State Treasury, said several of its quoting obligations, including bid-ask spreads, had been loosened.

“Volatility is still significantly higher compared to before the (Ukraine) war and also ECB uncertainty has also led to more volatility and more volatility makes it harder for primary dealers to comply,” he said.

Liquidity has been declining since late 2021 as traders started anticipating ECB rate hikes, Teerhuis said. The Netherlands then loosened its quoting obligations following the invasion of Ukraine.

Belgium’s quoting obligations also move with changes in trading conditions. But it has relaxed since March the rules on how many times per month dealers are allowed to fail to comply with them and has also reduced how much dealers are required to quote on trading platforms, its debt agency chief Maric Post said.

The two countries also loosened rules during the COVID-19 pandemic. Belgium’s Post said that lasted only four months in 2020, but it has kept obligations looser for much longer this time.

Finland said it has not changed its rules, but could not rule out acting if conditions persist or worsen.

Outside the bloc, Norway has also allowed dealers to set wider bid-ask spreads.

In Italy, debt management chief Davide Iacovoni said on Tuesday it was considering adjusting the way it ranks primary dealers each year to encourage them to quote tight spreads. Such rankings can affect which banks get to take part in lucrative syndicated debt sales.

Debt offices where obligations adapt automatically said attempts to enforce pre-determined bid-ask spreads in volatile markets would discourage primary dealers from providing liquidity and cause more volatility.

“If the market is too volatile, if it’s too risky, if it’s too costly, it’s better to adjust the bid-offer to what is the reality of the market than to force liquidity,” France’s debt chief Cyril Rousseau told an event on Tuesday.

Britain’s September sell-off highlighted how liquidity can evaporate fast in markets that are already volatile when a shock hits. In that case, the government’s big spending plans triggered large moves in debt prices, forcing pension funds to resort to fire sales of assets to meet collateral calls.

‘FRAGMENTED MARKET’

Allianz senior economist Patrick Krizan said with bond volatility nearing 2008 levels, a fragmented market for safe assets was a concern.

The euro zone is roughly 60% the size of the U.S. economy but it relies on Germany’s 1.6 trillion euro bond market as a safe haven – a fraction of the $23-trillion U.S. Treasury market.

In the case of a volatility shock “you can very easily fall into a situation where some markets are really drying up,” Krizan said. “For us it’s one of the biggest risks for the euro area.”

For example, the Netherlands like Germany has a top, triple A rating. But like other smaller euro zone markets it does not offer futures, a key hedging instrument, and so far this year the premium it pays over German debt has doubled to around 30 basis points.

Smaller governments pay premium over bigger rating peers

Efforts by debt officials are welcomed by European primary dealers, whose numbers have dwindled in recent years because of shrinking profit margins and tougher regulation.

Two officials at primary dealer banks said that fulfilling the quoting obligations in current conditions would force them to take on more risk.

“If (issuers) want private sector market-making, it needs to be profitable, or why would anyone do it? And it can’t be if rates move around 10-15 basis points a day,” one said of moves of a scale that had rarely been seen in these markets in recent years.

($1 = 0.9970 euros)

Reporting by Yoruk Bahceli and Dhara Ranasinghe; additional reporting by Belen Carreno in MADRID, Lefteris Papadimas in ATHENS and Padraic Halpin in DUBLIN; editing by Tomasz Janowski

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Health

Long COVID’s link to suicide: scientists warn of hidden crisis

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CHICAGO/LONDON, Sept 8 (Reuters) – Scott Taylor never got to move on from COVID-19.

The 56-year-old, who caught the disease in spring 2020, still had not recovered about 18 months later when he killed himself at his home near Dallas, having lost his health, memory and money.

“No one cares. No one wants to take the time to listen,” Taylor wrote in a final text to a friend, speaking of the plight of millions of sufferers of long COVID, a disabling condition that can last for months and years after the initial infection.

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“I can hardly do laundry without complete exhaustion, pain, fatigue, pain all up and down my spine. World spinning dizzily, nausea, vomiting, diarrhea. It seems I say stuff and have no idea of what I’m saying,” Taylor added.

Long COVID is a complex medical condition that can be hard to diagnose as it has a range of more than 200 symptoms – some of which can resemble other illnesses – from exhaustion and cognitive impairment to pain, fever and heart palpitations, according to the World Health Organization.

There is no authoritative data on the frequency of suicides among sufferers. Several scientists from organizations including the U.S. National Institutes of Health and Britain’s data-collection agency are beginning to study a potential link following evidence of increased cases of depression and suicidal thoughts among people with long COVID, as well as a growing number of known deaths.

“I’m sure long COVID is associated with suicidal thoughts, with suicide attempts, with suicide plans and the risk of suicide death. We just don’t have epidemiological data,” said Leo Sher, a psychiatrist at Mount Sinai Health System in New York who studies mood disorders and suicidal behavior.

Among key questions now being examined by researchers: does the risk of suicide potentially increase among patients because the virus is changing brain biology? Or does the loss of their ability to function as they once did push people to the brink, as can happen with other long-term health conditions?

Sher said pain disorders in general were a very strong of predictor of suicide, as was inflammation in the brain, which several studies have linked with long COVID.

“We should take this seriously,” he added.

An analysis for Reuters conducted by Seattle-based health data firm Truveta showed that patients with long COVID were nearly twice as likely to receive a first-time antidepressant prescription within 90 days of their initial COVID diagnosis compared with people diagnosed with COVID alone.

The analysis was based on data from 20 major U.S. hospital systems, including more than 1.3 million adults with a COVID diagnosis and 19,000 with a long COVID diagnosis between May 2020 and July 2022.

‘WE DON’T KNOW THE EXTENT’

The potential long-term effects of COVID-19 are poorly understood, with governments and scientists only now starting to systematically study the area as they emerge from a pandemic that itself blindsided much of the world.

While many long COVID patients recover over time, around 15% still experience symptoms after 12 months, according to the University of Washington’s Institute for Health Metrics and Evaluation (IHME). There’s no proven treatment and debilitating symptoms can leave sufferers unable to work.

The implications of long COVID potentially being linked with increased risk of mental illness and suicide are grave; in America alone, the condition has affected up to 23 million people, the U.S. Government Accountability Office estimated in March.

Long COVID has also pushed roughly 4.5 million out of work, equal to about 2.4% of the U.S. workforce, employment expert Katie Bach of the Brookings Institution told Congress in July.

Worldwide, nearly 150 million people are estimated to have developed long COVID during the first two years of the pandemic, according to the IHME.

In many developing countries, a lack of surveillance of long COVID makes the picture even murkier, said Murad Khan, a psychiatry professor at Aga Khan University in Karachi, Pakistan, who is part of an international group of experts researching the suicide risk linked to COVID-19.

“We have a huge problem, but we don’t know the extent of the problem,” he said.

HITTING BREAKING POINT

Time is a scarce commodity for a growing number of long COVID sufferers who say they are running out of hope and money, according to Reuters interviews with several dozen patients, family members and disease experts.

Lauren Nichols, who has long COVID, takes a break from work to read her blood oxygen levels and heart rate from a machine on her finger in her home in Andover, Massachusetts, U.S., August 3, 2022. REUTERS/Lauren Owens Lambert

For Taylor, who lost his job selling genomic tests to physicians in a round of layoffs in the summer of 2020, the breaking point came when his insurance coverage through his former employer was due to expire and his application for social security benefits was denied, his family said.

“It was the straw that broke the camel’s back,” his older brother Mark Taylor said.

Heidi Ferrer, a 50-year-old TV screenwriter originally from Kansas, killed herself in May 2021 to escape the tremors and excruciating pain that left her unable to walk or sleep after contracting COVID more than a year earlier, her husband Nick Guthe said.

Guthe, a filmmaker who has become an advocate for long COVID sufferers since his wife’s death, said that until this past winter, he had not heard of other suicides within the network of long COVID patients.

“They’re now coming on a weekly basis,” he added.

Survivor Corps, an advocacy group for long COVID patients, said it polled their membership in May and found that 44% of nearly 200 respondents said they had considered suicide.

Lauren Nichols, a board member at the long COVID support group Body Politic, said that through contact with family members on social media she was aware of more than 50 people with long COVID who had killed themselves, though Reuters was unable to independently confirm the cases.

Nichols, 34, a logistics expert for the U.S. Department of Transportation in Boston, says she herself has considered suicide several times because of long COVID, which she has suffered for more than two years.

Exit International advises English-speakers on how to seek help with assisted dying in Switzerland, where euthanasia is legal with certain checks. Fiona Stewart, a director, said the organization, which does not track outcomes after providing advice, had received several dozen inquiries from long COVID patients during the pandemic and was now getting about one a week.

LONG COVID AND OMICRON

The U.S. National Institutes of Health is tracking mental health impacts as part of its $470 million RECOVER study into long COVID. Early results on anxiety and depression rates are expected by early September, but information on suicide will take longer, said Dr. Stuart Katz, a lead researcher.

“What we do know is that persons with chronic illnesses are susceptible to suicidal thoughts, suicide attempts and suicide completion,” said Richard Gallagher, an associate professor of child psychiatry at NYU Langone Health, who is part of RECOVER.

On the question of whether the virus changes the brain, Gallagher said there was some evidence that COVID can cause brain inflammation – which has been linked to suicide and depression – even among people who had relatively mild disease.

“There may be direct, in some ways, toxic effects of the virus, and part of it will be inflammation,” he said.

Long COVID on average reduces overall health by 21% – similar to total deafness or a traumatic brain injury, the University of Washington’s IHME found.

Although some experts expected Omicron to be less likely to cause long COVID, official UK data released this month found that 34% of the 2 million long COVID sufferers in the country developed their symptoms after an Omicron infection.

A British government advisory group is studying the suicide risk for long COVID patients compared with the wider population while the state Office for National Statistics (ONS) is investigating whether it can assess upfront a long COVID patient’s risk of suicide as it does for people with other diseases, such as cancer.

“Health conditions that are disabling long-term may add to suicide risk, hence the concern over long COVID,” said Louis Appleby, a psychiatry professor at the University of Manchester and a UK government adviser.

Indeed, research in Britain and Spain found a six-fold increased risk of suicide among patients with myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS), another post-viral illness with similar symptoms to long COVID, when compared with the general population.

Britain’s network of long COVID treatment centers is also drastically oversubscribed, adding to a sense of hopelessness for some; in June, the latest month on record, only a third of patients received an appointment within six weeks of being referred by their local doctor, and another third had to wait for more than 15 weeks.

Ruth Oshikanlu, a former midwife and health visitor in London turned pregnancy coach, said her long COVID health problems combined to push her close to the edge. When her business temporarily folded due to debt issues after she struggled to work, she felt her life was over.

“I was crying to the accountant, and the guy kept me on hold – I think he didn’t want to be the last person to talk to me,” the 48-year-old recalled.

“What COVID gives you is a lot of time to think,” she said. “I didn’t think of ending it, thankfully, because of my son. But I do know so many people who have had those suicidal thoughts.”

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Reporting by Julie Steenhuysen in Chicago and Jennifer Rigby in London; Editing by Michele Gershberg and Pravin Char

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Business

Toyota doubles down on its hybrid bet in India

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  • Toyota teams up with Suzuki to crack Indian hybrid market
  • First new model is compact SUV, people-carrier to follow
  • Toyota aims to lower costs by making components in India

BIDADI, India, Aug 22 (Reuters) – Toyota is rebooting its strategy for India, doubling down on a bet that emerging markets will learn to love its hybrids, as long as the price is right.

Renowned for its pioneering Prius, the Japanese carmaker has struggled to sell large numbers of its hybrid Camry sedan since its Indian debut in 2013, partly due to a sticker price of more than eight times the annual income of a middle-class family.

This time, Toyota is determined to do it differently with lower-cost hybrids, said four company and industry executives and suppliers who provided previously unreported details about the carmaker’s sourcing, production and pricing strategy.

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Central to the strategy is a drive to cut the cost of full hybrid powertrains by making them in India, where the automaker’s factories are running well below capacity, and to source key materials within the country.

Toyota Motor (7203.T) is also leveraging its cooperation with partner Suzuki Motor (7269.T), majority owner of India’s biggest carmaker Maruti (MRTI.NS), to benefit from its low-cost engineering know-how and mild hybrid technology.

“The hybrid bet is a turning point. It will be a litmus test for Toyota’s future and success in India,” one person with direct knowledge of Toyota’s plans told Reuters.

A full hybrid can be driven for stretches on electric power whereas mild hybrid technology only supplements the combustion engine to help cut emissions. However, mild hybrids have smaller batteries and cost far less.

Toyota’s Indian strategy is at odds with global rivals Volkswagen (VOWG_p.DE), General Motors (GM.N) and India’s Tata Motors (TAMO.NS), which are rushing to roll out pure electric vehicles (EVs), and comes in the face of criticism from investors for sticking with fossil-fuel hybrids.

Hybrids are generally cheaper than EVs as they typically have smaller batteries and are not reliant on charging stations, important factors in markets such as India where customers are price sensitive and charging infrastructure can be patchy.

Toyota declined to share details about cost savings, future product launches, car pricing strategies or production plans for full or mild hybrid models in India.

The world’s biggest automaker told Reuters it wanted more first-time buyers in India to own full hybrids as a first step towards mass electrification, and that it would continue to increase local sourcing and production to be competitive.

LEARNING TO LOVE MILD

Toyota’s first new hybrid to hit India’s roads will be the Urban Cruiser Hyryder, a compact sports-utility vehicle (SUV) which two people with knowledge of the plan said is likely to be priced around $25,000 – less than half the price of the Camry.

That would pit it against popular midsize combustion-engine SUVs made by Hyundai Motor (005380.KS) and Kia Motor (000270.KS) in a fast-growing segment that makes up 18% of car sales in India, the world’s fourth-biggest auto market.

The full hybrid Hyryder, however, will be 31% more fuel efficient than the Hyundai and Kia diesel models, offering an economy of 28 km per litre (65 miles per gallon), a key metric for Indian buyers.

To bring down the cost of the Hyryder, which will be sold by Toyota and Suzuki, it will use a hybrid system originally developed for subcompact cars, or one size smaller, according to a Toyota engineer familiar with hybrid technology.

By combining the hybrid system with a low-cost chassis and some upper body parts from Suzuki, the end result is an SUV on a par with or slightly cheaper than the Prius sedan, which starts at $25,000 in the United States.

“The high-cost complexity of hybrids is hard to overcome, but it’s a good start,” the Toyota source, who was not involved in the Hyryder’s development, said.

Savings have also come from working with Suzuki on designing and developing the SUV, as well as leveraging the scale and pricing power with suppliers of Maruti, which produced eight of the 10 best-selling models in India in 2021.

Even so, there is a cost differential of $3,400 between Toyota’s full hybrid and its comparable gasoline car in India, said another source, higher than the typical differential of about $2,000 for Toyota in most countries.

To boost sales in India’s price-sensitive market, Toyota will also sell Hyryders with a mild hybrid powertrain supplied by Suzuki, a significant departure for Toyota which has long championed full hybrids.

The shift is a recognition that Toyota has been unable to bring down the cost of full hybrids to the point where they can always compete on price in markets such as India, the people familiar with Toyota’s planning said.

It also shows how Toyota is altering its strategy for different markets, depending on what buyers want and are willing to pay.

“As we come down the price points … we hope to increase our numbers as well as our market share,” Vikram Kirloskar, vice chairman of Toyota Kirloskar Motor, the Japanese company’s Indian unit, told Reuters.

Toyota’s next hybrid for India will be a multi-purpose vehicle, or people-carrier, expected later this year or early in 2023, two sources said.

BUILDING IN BIDADI

Another factor affecting the Hyryder’s price is taxation. India levies taxes of 43% on hybrids – on a par with gasoline or diesel SUVs and far higher than the 5% tax on EVs.

Toyota is lobbying to get the taxes reduced, sources said. The company said it wants New Delhi to provide support, including taxation, to all green technologies that help India achieve its goal of reducing fossil fuel and carbon emissions.

So far, the government has not shown any interest in extending its fiscal support beyond EVs.

Making hybrid powertrains in India aligns Toyota with Prime Minister Narendra Modi’s drive to boost local manufacturing, especially at a time when major car companies such as Ford Motor (F.N) have left the country. read more

It also comes as India tightens fuel efficiency and emission targets for carmakers. Selling hybrids will help Toyota meet its regulatory requirements as credits they earn will go towards offsetting the production of fossil-fuel vehicles.

At the Toyota Kirloskar Auto Parts factory in Bidadi, an industrial town near Bengaluru in southern India, the Japanese automaker’s new Indian strategy is already in motion.

A joint venture between Toyota, its parts affiliate Aisin Seiki Co (7259.T) and India’s Kirloskar Systems, the plant is manufacturing E-Drives for the Toyota Hybrid System.

The E-Drive ensures seamless switching between the engine and electric motor, and shifting the manufacture of one of the hybrid system’s four key components to India is a major move.

Toyota sees the Bidadi factory as a starting point for building a local supply chain for the EVs it will eventually bring to India.

“We now have the core technology, whether it’s an electric vehicle or a hybrid,” Kirloskar said.

‘IT’S A HUGE BET’

The plant can make 135,000 E-Drives a year on one assembly line and could raise that to over 400,000 by adding two more.

About 55% of raw materials by value for the E-Drives come from India, two sources said. Capital equipment, such as tools and dies, are also made there, though rare earth magnets for the motors and some other components are imported.

The cost savings on the made-in-India E-Drives are expected to be in the “double-digits” in percentage terms compared with imported systems, one source said.

Toyota will also export them back to Japan for hybrid cars built there, as well as to countries in Southeast Asia.

“India is one of the lowest cost bases for these parts. We are competitive on this,” Kirloskar said, adding that he expected about 40% to 50% to be exported, though that could change depending on local demand.

Of the three other main hybrid components, Toyota already makes engines in India but the 1.8 kilowatt-hour (kWh) lithium-ion batteries and power control units will be imported for now.

Toyota is making the Hyryder at its under-used and revamped plant in Bidadi, which has an annual capacity of 200,000 cars.

More than 50% of Hyryder pre-orders are for the full hybrid, though people aware of Toyota’s production plans say this could settle at 30% to 40% with the cheaper, mild hybrid becoming more popular in India – where most cars sell for under $15,000.

“Once numbers pick up, the cost will come to a point where hybrids will become mainstream. This will lay the ground for an eventual switch to fully electric or fuel cell vehicles,” said one person familiar with Toyota’s plans.

“It’s a huge bet but we know electrification is the future.”

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Reporting by Aditi Shah in Bidadi, India, and Norihiko Shirouzu in Beijing; Editing by David Clarke

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World

Inside the super-secure Swiss lab trying to stop the next pandemic

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SPIEZ, Switzerland, July 31 (Reuters) – The setting is straight from a spy thriller: Crystal waters below, snow-capped Swiss Alps above and in between, a super-secure facility researching the world’s deadliest pathogens.

Spiez Laboratory, known for its detective work on chemical, biological and nuclear threats since World War Two, was tasked last year by the World Health Organization to be the first in a global network of high-security laboratories that will grow, store and share newly discovered microbes that could unleash the next pandemic.

The WHO’s BioHub program was, in part, born of frustration over the hurdles researchers faced in getting samples of the SARS-CoV-2 virus, first detected in China, to understand its dangers and develop tools to fight it.

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But just over a year later, scientists involved in the effort have encountered hurdles.

These include securing guarantees needed to accept coronavirus variant samples from several countries, the first phase of the project. Some of the world’s biggest countries might not cooperate. And there is no mechanism yet to share samples for developing vaccines, treatments or tests without running afoul of intellectual property protections.

“If we have another pandemic like coronavirus, the goal would be it stays wherever it starts,” Isabel Hunger-Glaser, head of the BioHub project at Spiez, told Reuters in a rare media interview at the lab. Hence the need to get samples to the hub so it can help scientists worldwide assess the risk.

“We have realised it’s much more difficult” than we had thought, she said.

SAFETY IN THE MOUNTAINS

Spiez Lab’s exterior provides no hint of the high-stakes work inside. Its angular architecture resembles European university buildings erected in the 1970s. At times, cows graze on the grassy central courtyard.

But the biosafety officer in charge keeps his blinds shut. Alarms go off if his door is open for more than a few seconds. He monitors several screens showing security camera views of the labs with the greatest Biosafety Level (BSL) precautions.

SARS-CoV-2, the virus causing COVID, is studied in BSL-3 labs, the second-highest security level. Samples of the virus used in the BioHub are stored in locked freezers, said Hunger-Glaser. A system of decreasing air pressure means clean air would flow into the most secure areas, rather than contaminated air flowing out, in a breach.

Scientists working with coronavirus and other pathogens wear protective suits, sometimes with their own air supply. They work with samples in a hermetically sealed containment unit. Waste leaving the lab is super-heated at up to 1,000 degrees Celsius (1,830 F) to kill pathogens clinging to it.

To date, Spiez has never had an accidental leak, the team say. That reputation is a key part of why they were chosen as the WHO’s first BioHub, said Hunger-Glaser.

The proximity to WHO headquarters, two hours away in Geneva, helped too. The WHO and Swiss government are funding the annual 600,000 Swiss franc ($626,000) budget for its first phase.

Researchers have always shared pathogens, and there are some existing networks and regional repositories. But the process is ad hoc and often slow.

The sharing process has also been controversial, for instance when researchers in wealthy countries get credit for the work of less well-connected scientists in developing nations.

“Often you just exchanged material with your buddies,” said Hunger-Glaser.

Marion Koopmans, head of the Erasmus MC Department of Viroscience in the Netherlands, said it took a month for her lab to get hold of SARS-CoV-2 after it emerged in the central Chinese city of Wuhan in December 2019.

Chinese researchers were quick to post a copy of the genetic sequence online, which helped researchers begin early work. But efforts to understand how a new virus transmits and how it responds to existing tools requires live samples, scientists said.

EARLY CHALLENGES

Luxembourg was the first country to share samples of new coronavirus variants with the BioHub, followed by South Africa and Britain.

Luxembourg sent in Alpha, Beta, Gamma and Delta variants, while the latter two countries shared Omicron, WHO said.

Luxembourg got Omicron samples from South Africa, via the hub, less than three weeks after it was identified, enabling its researchers to start assessing the risks of the now-dominant strain. Portugal and Germany also received Omicron samples.

But Peru, El Salvador, Thailand and Egypt, all of which signalled in early 2022 that they wanted to send in variants found domestically, are still waiting, chiefly because it is unclear which official in each country should provide the necessary legal guarantees, Hunger-Glaser said.

There is no international protocol for who should sign the forms providing safety details and usage agreements, she added. None of the four countries responded to requests for comment.

Both WHO and Hunger-Glaser stressed the project is a pilot, and they have already sped up certain processes.

Another challenge is how to share samples used in research that could lead to commercial gain, such as vaccine development. BioHub samples are shared for free to provide broad access. However this throws up potential problems if, for example, drugmakers reap profits from the discoveries of uncompensated researchers.

WHO plans to tackle this longer-term, and bring labs in each global region online, but it is not yet clear when or how this will be funded. The project’s voluntary nature may also hold it back.

“Some countries will never ship viruses, or it can be extremely difficult – China, Indonesia, Brazil,” said Koopmans, referring to their stance in recent outbreaks. None of the three responded to requests for comment.

The project also comes amid heightened attention on labs worldwide after unproven claims in some Western countries that a leak from a high-security Wuhan lab may have sparked the COVID-19 pandemic, an accusation China and most international scientists have dismissed.

Hunger-Glaser said the thinking around emerging threats must change post-COVID-19.

“If it is a real emergency, WHO should even get a plane” to transport the virus to scientists, she said.

“If you can prevent the spreading, it’s worthwhile.”

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Reporting by Jennifer Rigby; Editing by Michele Gershberg and Nick Macfie

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Business

How China became ground zero for the auto chip shortage

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TAIPEI/SHANGHAI/SINGAPORE, July 19 (Reuters) – From his small office in Singapore, Kelvin Pang is ready to wager a $23 million payday that the worst of the chip shortage is not over for automakers – at least in China.

Pang has bought 62,000 microcontrollers, chips that help control a range of functions from car engines and transmissions to electric vehicle power systems and charging, which cost the original buyer $23.80 each in Germany.

He’s now looking to sell them to auto suppliers in the Chinese tech hub of Shenzhen for $375 apiece. He says he has turned down offers for $100 each, or $6.2 million for the whole bundle, which is small enough to fit in the back seat of a car and is packed for now in a warehouse in Hong Kong.

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“The automakers have to eat,” Pang told Reuters. “We can afford to wait.”

The 58-year-old, who declined to say what he himself had paid for the microcontrollers (MCUs), makes a living trading excess electronics inventory that would otherwise be scrapped, connecting buyers in China with sellers abroad.

The global chip shortage over the past two years – caused by pandemic supply chaos combined with booming demand – has transformed what had been a high-volume, low-margin trade into one with the potential for wealth-spinning deals, he says.

Automotive chip order times remain long around the world, but brokers like Pang and thousands like him are focusing on China, which has become ground zero for a crunch that the rest of the industry is gradually moving beyond.

Globally, new orders are backed up by an average of about a year, according to a Reuters survey of 100 automotive chips produced by the five leading manufacturers.

To counter the supply squeeze, global automakers like General Motors Co (GM.N), Ford Motor Co (F.N) and Nissan Motor Co (7201.T) have moved to secure better access through a playbook that has included negotiating directly with chipmakers, paying more per part and accepting more inventory.

For China though, the outlook is bleaker, according to interviews with more than 20 people involved in the trade from automakers, suppliers and brokers to experts at China’s government-affiliated auto research institute CATARC.

Despite being the world’s largest producer of cars, and leader in electric vehicles (EVs), China relies almost entirely on chips imported from Europe, the United States and Taiwan. Supply strains have been compounded by a zero-COVID lockdown in auto hub Shanghai that ended last month.

As a result, the shortage is more acute than elsewhere and threatens to curb the nation’s EV momentum, according to CATARC, the China Automotive Technology and Research Center. A fledgling domestic chipmaking industry is unlikely to be in a position to cope with demand within the next two to three years, it says.

Pang, for his part, sees China’s shortage continuing through 2023 and deems it dangerous to hold inventory after that. The one risk to that view, he says: a sharper economic slowdown that could depress demand earlier.

FORECASTS ‘HARDLY POSSIBLE’

Computer chips, or semiconductors, are used in the thousands in every conventional and electric vehicle. They help control everything from deploying airbags and automating emergency braking to entertainment systems and navigation.

The Reuters survey conducted in June took a sample of chips, produced by Infineon, Texas Instruments, NXP, STMicroelectronics and Renesas, which perform a diverse range of functions in cars.

New orders via distributors are on hold for an average lead time of 49 weeks – deep into 2023, according to the analysis, which provides a snapshot of the global shortage though not a regional breakdown. Lead times range from 6 to 198 weeks.

German chipmaker Infineon (IFXGn.DE) told Reuters it is “rigorously investing and expanding manufacturing capacities worldwide” but said shortages may last until 2023 for chips outsourced to foundries.

“Since the geopolitical and macroeconomic situation has deteriorated in recent months, reliable assessments regarding the end of the present shortages are hardly possible right now,” Infineon said in a statement.

Taiwan chipmaker United Microelectronics Corp (2303.TW) told Reuters it has been able to reallocate some capacity to auto chips due to weaker demand in other segments. “On the whole, it is still challenging for us to meet the aggregate demand from customers,” the company said.

TrendForce analyst Galen Tseng told Reuters that if auto suppliers needed 100 PMIC chips – which regulate voltage from the battery to more than 100 applications in an average car – they were currently only getting around 80.

URGENTLY SEEKING CHIPS

The tight supply conditions in China contrast with the improved supply outlook for global automakers. Volkswagen, for example, said in late June it expected chip shortages to ease in the second half of the year. read more

The chairman of Chinese EV maker Nio , William Li, said last month it was hard to predict which chips would be in short supply. Nio regularly updates its “risky chip list” to avoid shortages of any of the more than 1,000 chips needed to run production.

In late May, Chinese EV maker Xpeng Motors (9868.HK) pleaded for chips with an online video featuring a Pokemon toy that had also sold out in China. The bobbing duck-like character waves two signs: “urgently seeking” and “chips.”

“As the car supply chain gradually recovers, this video captures our supply-chain team’s current condition,” Xpeng CEO He Xiaopeng posted on Weibo, saying his company was struggling to secure “cheap chips” needed to build cars.

ALL ROADS LEAD TO SHENZHEN

The scramble for workarounds has led automakers and suppliers to China’s main chip trading hub of Shenzhen and the “gray market”, brokered supplies legally sold but not authorized by the original manufacturer, according to two people familiar with the trade at a Chinese EV maker and an auto supplier.

The gray market carries risks because chips are sometimes recycled, improperly labeled, or stored in conditions that leave them damaged.

“Brokers are very dangerous,” said Masatsune Yamaji, research director at Gartner, adding that their prices were 10 to 20 times higher. “But in the current situation, many chip buyers need to depend on the brokers because the authorized supply chain cannot support the customers, especially the small customers in automotive or industrial electronics.”

Pang said many Shenzhen brokers were newcomers drawn by the spike in prices but unfamiliar with the technology they were buying and selling. “They only know the part number. I ask them: Do you know what this does in the car? They have no idea.”

While the volume held by brokers is hard to quantify, analysts say it is far from enough to meet demand.

“It’s not like all the chips are somewhere hidden and you just need to bring them to the market,” said Ondrej Burkacky, senior partner at McKinsey.

When supply normalizes, there may be an asset bubble in the inventories of unsold chips sitting in Shenzhen, analysts and brokers cautioned.

“We can’t hold on for too long, but the automakers can’t hold on either,” Pang said.

CHINESE SELF-SUFFICIENCY

China, where advanced chip design and manufacturing still lag overseas rivals, is investing to decrease its reliance on foreign chips. But that will not be easy, especially given the stringent requirements for auto-grade chips.

MCUs make up about 30% of the total chip costs in a car, but they are also the hardest category for China to achieve self-sufficiency in, said Li Xudong, senior manager at CATARC, adding that domestic players had only entered the lower end of the market with chips used in air conditioning and seating controls.

“I don’t think the problem can be solved in two to three years,” CATARC chief engineer Huang Yonghe said in May. “We are relying on other countries, with 95% of the wafers imported.”

Chinese EV maker BYD, which has started to design and manufacture IGBT transistor chips, is emerging as a domestic alternative, CATARC’s Li said.

“For a long time, China has seen its inability to be totally independent on chip production as a major security weakness,” said Victor Shih, professor of political science at the University of California, San Diego.

With time, China could build a strong domestic industry as it did when it identified battery production as a national priority, Shih added.

“It led to a lot of waste, a lot of failures, but then it also led to two or three giants that now dominate the global market.”

(Corrects to delete incorrect reference to average chip order lead time in paragraph 16. The story was previously corrected to fix attribution in paragraph 34 to CATARC’s Li Xudong, not Nio’s William Li.)

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Reporting by Sarah Wu, Zhang Yan, Kevin Krolicki, Jane Lanhee Lee, Tim Kelly, Chen Lin; Additional reporting by Norihiko Shirouzu in Beijing; Editing by Pravin Char

Our Standards: The Thomson Reuters Trust Principles.

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