Europe’s Bad Connections

Plus: The cobalt supply chain is a man-made disaster ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

February 28, 2023

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TOGETHER WITH

Good morning.

Inflation is really showing its teeth.

In honor of today’s National Tooth Fairy Day, Delta Dental announced the results of its annual poll surveying parents about how much cash they leave tucked under the pillow for a single lost tooth. The results? An unsurprising all-time high of $6.23, up from $5.36 last year and a buck-thirty way back in 1998. Though we also hear today’s kids prefer payment in Venmo, not cash.

Morning Brief

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Cobalt miners have a time bomb on their hands.

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Will Europe adapt to the 5G revolution easily?

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Another NBA team scores a slam dunk sale.

Materials

A Huge Stockpile of Cobalt Looms Over The Market

The electric car industry runs on cobalt, a relatively rare metal whose supply and demand are determined by more than just Mother Nature… and that’s suddenly a real problem for cobalt miners.

A mine in the Democratic Republic of Congo has been stockpiling copper and cobalt since July because its China-based owner has been stuck in an argument with its local partner creating a bottleneck while the mine continues mining. Bloomberg reports the heap has grown to about $1.5 billion worth of metal, and while cobalt makes up the minority of that pile, its existence is casting a long shadow over the cobalt market.

Between The Devil And The Deep Blue Metal

Cobalt is a vital ingredient in batteries, and DRC produces a vast amount of the world’s supply. The Tenke Fungurume Mine digs out roughly 15% of the world’s cobalt supply, according to Bloomberg. The price of cobalt has fallen 60% from its peak last year per Bloomberg — so a huge pile of the stuff waiting to bust the bottom out of the market is not a welcome presence.

Jack Bedder, director of the analyst group Project Blue, told The Daily Upside that the Congolese mine is not the only abundance in the cobalt market. “There are build-ups of hydroxide at TFM — but also at other operations in the DRC, as well as in warehouses in Zambia and South Africa,” he said, adding that supply is ramping up in Indonesia. “It looks like the market will be oversupplied for months to come,” Bedder said.

Major buyers of cobalt include phone and EV manufacturers. For these companies, ties to cobalt miners are an uncomfortable truth, as the supply side is infamous for child labor and other human rights violations. Plus there is ultimately a finite amount of cobalt that can be extracted. Some companies are already trying to side-step the problem of unethical, unsustainable mining:

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On Monday a lithium-ion battery recycling company called Li-Cycle scored a $375 million loan from the US Department of Energy to build a new recycling facility. Li-Cycle CEO Ajay Kochhar told CNBC he believes recycled metals could represent 50% of the global supply in 30 years.

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The EU is also backing recyclable batteries, and in December drew up new rules setting out minimum requirements for making minerals in batteries recoverable.

The Legend of Putin’s Gold: While DRC has a pile of cobalt it would like to get moving, Sudan is trying to keep folks from making off with its gold. The Sudanese government is probing 36 Russian employees of a mining company over allegations of gold smuggling. CNN reported in July that Russian cargo planes were finagling gold out of Sudan, with one plane’s manifest claiming it was exporting cookies. Guess that’s how the gold bar crumbles.

– Isobel Asher Hamilton

Communications

Does Europe Have Too Many Mobile Operators?

(Photo Credit: Kabiur Rahman Riyad/Unsplash)

When it comes to internet connectivity in Europe, too many cooks are spoiling the broadband broth.

Telecom experts and industry leaders believe Europe has too many mobile networks and say consolidating the myriad companies would help quickly expand 5G coverage, the latest and fastest global wireless standard in the internet of things.

So Many Options

The Mobile World Congress in Barcelona, Spain, kicked off Monday, and consolidation will certainly be a big topic of discussion. Börje Ekholm, CEO of Swedish telecom giant Ericsson, said having too many operators is unsustainable. “The big problem in Europe is really that our customers can simply not afford to build out the networks and I think that is going to hurt European competitiveness long term,” he told CNBC.

In the US, mobile connectivity to pretty much all of the country is handled by Verizon, T-Mobile, and AT&T. Even smaller brands like Cricket Wireless and Mint Mobile (the Ryan Reynolds one) are actually owned by the bigger names and use their infrastructure. In China, people can choose between three different carriers, all of which are owned by the federal government.

The landscape in Europe, however, is a lot different:

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Many countries have at least three or four providers of telecom services that operate solely within their borders on top of larger, international brands like Vodafone. That means there are hundreds of operators within the European Union.

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There’s definitely more freedom of choice when it comes to mobile providers in Europe, but some say it’s slowed the rollout of 5G. Whereas the Netherlands had 45% 5G availability by the end of 2021, nearby France had only about 12% coverage, according to industry organization Groupe Speciale Mobile Association.

Anti-Monopoly: But it might be a while before the folk at Deutsche Telekom and Orange can start buying up all the little guys. EU regulators are unfailingly protective of competition, so mass consolidation is an iffy proposition. In 2016, the European Commission blocked CK Hutchison’s $12.6 billion acquisition of Telefonica’s British mobile unit O2, saying it would limit consumer choice, raise prices, and reduce service quality.

-Griffin Kelly

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Sports Ownership

Marc Lasry Sells Stake in Milwaukee Bucks at Sky-High Valuation

He shoots, he scores.

Milwaukee Bucks co-owner and private equity billionaire extraordinaire Marc Lasry has sold his stake in the NBA franchise at a valuation of $3.5 billion, sources told The Athletic and ESPN early Monday morning, after co-purchasing the team for just $550 million in 2014. It’s a big win for Lasry, though Bucks fans now find their elite-as-of-late team under the reign of the folks who also own… the Cleveland Browns.

Fear the Deer

Driving up the value of an NBA team has become something of an uncontested layup. Particularly, that is, if owners are willing to spend big on their teams. When Lasry co-led an ownership group with Fortress Investment Group’s Wes Edens (who will now partner with new owners Jimmy and Dee Haslam), the two promptly rehauled the franchise. To avoid a league-dictated sale and likely relocation to Seattle or Las Vegas, Lasry and Edens and other minority owners committed $100 million to construct a new arena to replace the aging Bradley Center. The spending extended to developing the area in downtown Milwaukee around the arena, adding bars and restaurants to create the new “Deer District,” as well as footing a “luxury tax” of $53 million last year and $76 million this year to exceed the salary cap and maintain a title-contending roster.

It’s an investment that has evidently paid off:

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As recently as November, Forbes estimated the Bucks’ value at $2.3 billion, up 21% year-over-year, and good for 15th in the NBA. Likely driving the $3.5 valuation: Mat Ishiba dropping $4 billion on the Phoenix Suns and Phoenix Mercury in December.

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The Suns’ price tag was the second-highest in pro sports history, behind only the $4.65 billion acquisition of the Denver Broncos led by Walmart heir Rob Walton in June. The Bucks sale is now the third biggest ever.

Heating Up: The good times are rolling in the NBA, and neither the players nor owners are willing to risk a lockout (and lost revenue). Sources told The Athletic on Monday that there’s positivity on both sides that an agreement on the league’s next collective bargaining agreement can be reached ahead of a looming March 31 deadline. One major likely change: allowing players to enter the league immediately after high school, thus eliminating “one-and-done” college hoopers. Please send sympathies to any University of Kentucky alumni in your life.

– Brian Boyle

Extra Upside

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It’s time to pay the price: TD Bank reached a $1.2 billion settlement for alleged involvement in Allen Stanford’s Ponzi scheme.

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‘The Yankee Tax’: A South Carolina state senator proposed a $500 tax for new residents.

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