Microsoft and ArcelorMittal back MIT spinout trying to green the $1.6 trillion steel industry
Removing molten iron from a pilot scale facility at the Boston Metal facilities in Woburn, Mass.
Photo courtesy Boston Metal
The $1.6 trillion steel industry is the backbone of the modern world. It’s also a significant contributor to global warming, representing between 7% and 9% of global carbon dioxide emissions, according to the World Steel Association.
That’s why massive global businesses, including international steel giant ArcelorMittal and tech stalwart Microsoft, are investing in Boston Metal, a company that spun out of Massachusetts Institute of Technology and developed a new way of making clean steel.
“There is no economy, there is no infrastructure without steel,” Boston Metal CEO Tadeu Carneiro told CNBC in a video call on Wednesday. So when it comes to decarbonizing industry to fight climate change, “it’s a big piece of the puzzle. I don’t think this is obvious to everybody,” Carneiro said.
In 2013, MIT professors Donald Sadoway and Antoine Allanore published a paper in the journal Nature with lab results proving that it is possible to generate steel without releasing carbon dioxide emissions. The same year they launched a company, Boston Electrometallurgical Corp., to scale and commercialize that technology.
In 2017, Carneiro joined the company as a CEO. He is a veteran of 40 years career in the steel industry, mostly at Brazilian metals giant CBMM. In 2018, Boston Metal raised its first round of funding, $20 million, in a round led by Breakthrough Energy Ventures, the climate investing firm founded by Microsoft co-founder Bill Gates.
Gates has for years emphasized the need to think about decarbonizing the manufacturing sector. Transportation gets a whole lot of attention but is responsible for only 16% of global emissions, where manufacturing generates 31%, according to Gates’ book, “How to Avoid a Climate Disaster.”
“Whenever I hear an idea for what we can do to keep global warming in check — whether it’s over a conference table or a cheeseburger — I always ask this question: ‘What’s your plan for steel?'” Gates wrote on his own blog in 2019.
On Friday, Boston Metal announced it has raised $120 million Series C round, led by multinational steel giant ArcelorMittal, with funding from Microsoft’s Climate Innovation Fund as well.
With the funding, Boston Metal will ramp up production of green steel at its pilot facility on Woburn, Massachusetts, and support the construction of its Brazilian subsidiary, Boston Metal do Brasil, where the company will manufacture various metals. It plans to begin construction of a demonstration steel plant in 2024 and a commercial sized plant in 2026, Carneiro told CNBC.
The Boston Metal team.
Photo courtesy Boston Metal
The cost of carbon for ArcelorMittal
For ArcelorMittal, making steel without greenhouse gas emissions is not only a responsibility, but also a business necessity according to Irina Gorbounova, a vice president and the Head of XCarb Innovation Fund at ArcelorMittal.
“Our customers are asking for it, our investors expect us to transition and our employees — and our future workforce — want to work for a company that is part of the solution and not part of the world’s climate problem,” Gorbounova told CNBC.
“Increasingly, we are also seeing a cost of carbon,” Gorbounova told CNBC. In Europe, the Emissions Trading System, or ETS, already puts a price on carbon emissions, Gorbounova told CNBC.
“The EU has been at the forefront of climate policy, but it’s reasonable to expect other regions to follow. So, there is a business case for us to decarbonize as well,” Gorbounova told CNBC. “Zero or near-zero carbon emissions steel will become a reality. The only question is how quickly we can make that journey happen. If steel companies don’t decarbonize, they will not stand the test of time.”
Ironically, steel is a primary component ingredient in many of the technologies being constructed to decarbonize, such as wind toward and electric vehicles, Gorbounova said.
Microsoft does not build cars or make steel, but it is trying to meet its own aggressive climate goals, which include being carbon negative by 2030 and removing all of the company’s historic carbon emissions since the company was founded in 1975.
Boston Metal CEO Tadeu Carneiro worked in the steel industry for decades before coming on to lead the MIT spin out.
Photo courtesy Boston Metal
How does Boston Metal do it?
Traditionally, the first step in steel production is to combine iron ore or iron oxide, which is mined out of the ground, with coal in a very hot blast furnace. That process generates significant CO2 emissions.
Scrap recycling is also a key part of the global industry, accounting for 30% of steel production (70%in the United States), and has a “much smaller” carbon footprint, Carneiro said.
Boston Metal’s technology, Molten Oxide Electrolysis, passes electricity through the iron oxide mixed with what Carneiro calls a “soup of other oxides” to make iron and oxygen. Oxides are chemical compounds that contain at least one oxygen atom, and Boston’s process includes common oxides like alumina, silica, calcium and magnesium.
“There’s no carbon involved” in the process of making the iron from this method, Carneiro said.
That said, heating this soup to the required 1,600 degrees Celsius requires significant electrical energy — making one million tons of steel per year will require 500 megawatts of baseload clean electricity, or about half the electricity necessary to power a midsize city. “The availability of electricity will dictate how fast the process will be implemented,” Carneiro said.
The electricity has to be clean as well, or it defeats the entire purpose.
“We believe in the future, we will have abundant and reliable and green and cheap electricity in order to use this process and manufacture green steel,” Carniero said.
There are other processes being developed to make clean steel with hydrogen, but they require very pure iron oxide, and only about 4% of the iron ore that is commercialized is suitable, Carniero said.
Boston Metal will eventually license its technology to steel companies, not be a steel manufacturer itself.
“Every steelmaking company is in contact with us to understand our progress and when we will become commercial,” Carneiro told CNBC. “They all making pledges to be carbon-neutral by 2050. And they don’t really have a solution right now. So, they really need a solution for large scale, and our technology is the only one that can scale up to this billions of tons of capacity.”
How Fanatics and MLB are planning to keep the trading card boom going
Julio Rodríguez of the Seattle Mariners was the American League Rookie of the Year in 2022. MLB trading card partner Fanatics has plans for new rookie card features this season as part of a bigger plan to increase the value of Topps baseball cards for collectors.
Diamond Images | Diamond Images | Getty Images
Fanatics made waves in the sports and collectibles industries when it pried the rights to make trading cards for Major League Baseball from incumbent Topps in August 2021, ending a partnership that dated back to 1952. The sports platform company made another huge splash last January when it acquired Topps outright for roughly $500 million.
Now, after releasing its first major Topps set alongside the start of the 2023 MLB season, Fanatics is starting to show how it plans to elevate the trading cards and collectibles space.
“Fanatics is focused on the best experience for the fan, and collectibles is focused on the best collector experience,” said Fanatics Collectibles CEO Mike Mahan. “That means having the most innovative, thoughtful, authentic products possible.”
Mahan, who joined Fanatics in June to lead the company’s trading cards and digital collectibles business after serving as CEO of Dick Clark Productions, said the “the collector experience in 2023 will be the best collector experience ever, and 2024 will be even better.”
That belief is driven from Fanatics Collectibles’ main focus areas so far, Mahan said: educating new collectors and better onboarding them into the hobby, building out the marketing around collectibles, enhancing the existing collector ecosystem and experience, and innovation.
Rookies play a big role in increasing baseball card value
Innovation drove one of the new initiatives Fanatics is adding this year around typically one of the biggest points of excitement, and value, for card collectors: the debut cards of highly touted rookies.
“One of the central questions that we’ve been trying to answer is how do we get cards to really capture the big moments,” Mahan said. “Baseball cards have been about the rookies for so long, so if rookie cards are the biggest things in sports, how do we make the best possible card? How do we bring people closer to that moment?”
That led to the creation of MLB Debut Patches, which Fanatics is touting as the first-ever memorabilia made in partnership with a pro sports league specifically for the inclusion on trading cards. Working with MLB and the MLB Players Association, every player who makes their debut this season will have a patch on their jersey. After the game, the patch will be authenticated and placed directly onto their rookie card in a future Topps set.
MLB chief revenue officer Noah Garden said that is the sort of the thing that will continue the momentum among collectibles and trading cards.
“It’s that emotional connection that drives the hobby, and brings fans closer to the game,” said Garden, who described himself as an avid baseball card collector. “They want to feel like a part of the game, and what is a better way to do that than to have something that was actually a part of it?”
While the sports trading card industry had seen growth in recent years, the pandemic put the hobby into overdrive. Cards across sports have been selling for record prices, including a $12.6 million sale for a 1952 Topps Mickey Mantle rookie card, the highest price ever paid for a trading card.
U.S. Google searches for “best sports cards to buy right now” increased by 680% between January 2020 and February 2023, according to data provided to CNBC by online visibility management SaaS platform Semrush. During the same period, average U.S. monthly visits to Topps.com grew by 218.5% to nearly 1.2 million, Semrush data showed.
But even as other collectibles that boomed during the pandemic have fallen out of favor like NFTs and Funko Pops, trading cards have looked to maintain their momentum.
Jeff Owens, editor of Sports Collectors Digest, the largest trade publication covering sports trading cards, said that the resurgence of the hobby was “primarily due to a resurgence in buying and selling during the pandemic and a large group of wealthy investors looking for alternative assets.”
The softening of the economy led a decline in the market of modern cards last year, but values and demand are still “well above” what they were before the pandemic, Owens said, adding that the market for vintage cards like the Mantle rookie card is “very, very strong.”
Owens also pointed to the growth and support of card shows across the U.S. – nearly 1,000 planned for 2023, which is a significant increase compared to previous years.
Mahan said that from Fanatics’ perspective, “it’s a very strong time for the hobby right now.”
The global sports trading card market is valued at $44 billion and is expected to approach $100 billion in 2027, according to data from Verified Market Research.
“We think very firmly that the best days are in front of it; we can’t control the broader economy and like any consumer good there’s some correlation with broader spending but go to any card show or shop right now, this is a very vibrant and healthy marketplace,” Mahan said.
When Topps was considering going public in a SPAC deal that would have valued it at $1.3 billion in April 2021, the company reported that it had record sales of $567 million in 2020, a 23% year-over-year increase. That SPAC deal was later canceled after Fanatics acquired the MLB rights, which ultimately led to Fanatics’ acquisition of the company.
Mahan declined to comment on Topps sales today, but he said that “the business and the industry continues to be in a great, great place.”
What MLB gets from the Topps deal
For MLB, the return of trading cards has also served as a boon, which Garden said has parallels to video games or other ways that the league looks to bring in new fans and turn casual fans into diehards.
Garden noted fans like his son, who is an avid baseball fan but may not know every player on a West Coast team besides their stars. “When these players start to break through nationally, you already know who to look for” based on the rookie cards and other cards in the set, he said.
“The importance of cards in the evolution of fandom I’ve always thought was important,” said Garden, noting that’s how he got into baseball. “But the business hadn’t seen innovation in forever and in many ways, it had gotten harder to collect. … What Fanatics has done so far to innovate the product and support the ecosystem has been nothing short of fantastic.”
While MLB cards remain the crown jewel for Topps, Mahan said that Fanatics is excited for what the future holds not only for baseball cards, but also for the other rights the company holds, which includes the ability to produce NBA and NFL cards in the coming years.
“The good news is trading cards and sports cards have been vibrant for a long time, they’ve mattered for a long time, they’ve been meaningful for a long time,” Mahan said. “It’s a business that has traditionally been cyclical and had its ups and downs. … We’re focused on education, innovation, marketing, and community, and bringing all of those together – given where we sit today with all of these good things yet to come, we feel our best is firmly in front of us.”
Earlier this year, Fanatics hired former Snap global head of content and partnerships Nick Bell to head its new Fanatics Live business, which will focus on building a digital customer shopping experience where you can buy trading cards and other collectibles via curated and personality-driven content and entertainment.
Bell told CNBC that one of the first focuses of this new business division will be around “breaking,” a form of social trading card buying. Similar to a blind raffle, a set number of individuals purchase an entry from a seller — called a “spot” — and the seller then opens an entire case of trading cards live online and allocates each of them. Fanatics would receive a cut of each card sale.
Fanatics raised $700 million in December to bring its valuation to $31 billion, capital that it planned to use on potential merger and acquisition opportunities across its collectibles, betting and gaming businesses, according to CNBC.
The company estimates its revenue for Fanatics, including its Lids segment, will be approximately $8 billion in 2023.
Fanatics is a three-time CNBC Disruptor 50 company, and ranked No. 21 in 2022.
Tesla has only installed 3,000 Solar Roof systems in the U.S., far below forecast, study finds
Tesla vehicles parked outside a home with a Tesla Solar Roof on Weems Street in Boca Chica Village, Texas, U.S., on Monday, June 21, 2021.
Veronica G. Cardenas | Bloomberg | Getty Images
Tesla has only installed 3,000 of its Solar Roof systems in the U.S. since touting the technology seven years ago, according to new research from Wood Mackenzie.
That installation rate falls well shy of Tesla’s guidance and ambitions for what it previously called its “solar glass” roof tiles. Wood Mackenzie notes that in late 2019 the company said it was aiming to manufacture 1,000 Solar Roofs weekly, and to install 1,000 per week in the first half of 2020.
The report offers the latest glimpse into Tesla CEO Elon Musk’s struggle to integrate a solar energy business into his electric car company following the 2016 acquisition of SolarCity, a solar installer founded and run by his cousins Peter and Lyndon Rive with his help.
Average weekly Tesla Solar Roof installations reached just 21 in 2022, Wood Mackenzie said. Tesla hit a high of 32 average weekly installations in the U.S. in the first quarter of last year, according to the study.
Musk first promoted a shingle-style solar panel in October 2016, as he was trying to garner shareholder enthusiasm for Tesla’s $2.6 billion purchase of SolarCity. The shingle he showed at a marketing event was not even a working prototype, it was later revealed. Musk had invested significant capital in SolarCity, and served as board chairman while also helming Tesla and SpaceX.
A group of Tesla shareholders eventually sued Tesla and Musk over the deal. Last year, the Delaware Court of Chancery ruled in favor of Musk in a bench trial. But the shareholders’ lawyers on Wednesday made their opening arguments in pursuit of an appeal in Delaware Supreme Court.
Shareholders alleged that Tesla’s SolarCity purchase amounted to a bailout and was pushed by Musk because his personal wealth and reputation were at stake. Musk has denied that he pressured the Tesla board to go through with the SolarCity deal. Had he lost, Musk could have been forced to pay upwards of $2 billion, CNBC previously reported.
While Tesla’s Solar Roof effort has struggled, the company’s traditional solar panels have seen some improved traction in the market.
The traditional solar-panel installations shrank considerably from 2016 to 2020, but volumes have been on the rise along with broader growth in the residential solar industry, Mackenzie Wood researchers told CNBC in an e-mail. Tesla installed traditional solar panel systems with a power generating capacity of 156 megawatts in 2021, and 248 megawatts in 2022, the researchers said.
The 3,000 Solar Roof systems that are installed in the U.S. have an estimated capacity of around 30 megawatts.
While Tesla intended to manufacture all of its solar roof tiles initially, it has instead procured photovoltaic glass from Chinese supplier, Almaden. Residential roofing company GAF Energy began manufacturing and selling a competing solar shingle to residential roofers in 2022.
The Tesla Solar Roof commanded less than .03% of the approximately 5 million new rooftops built in the U.S. in 2022, according to Wood Mackenzie.
Tesla didn’t respond to a request for comment.
After a more than $1 trillion rout, Beijing appears to be warming to Chinese tech giants
Beijing’s regulatory crackdown on the Chinese tech sector began in late 2020, wiping off more than a combined $1 trillion from the country’s biggest companies.
There are now signs that the central government is softening its stance towards internet titans like Alibaba, in a move that could prove positive for Chinese tech stocks.
“The regulatory headwinds that we had in the past two years … that’s now becoming from a headwind to a tailwind,” George Efstathopoulos, portfolio manager at Fidelity International, told CNBC’s “Street Signs Asia” on Wednesday.
On Tuesday, Alibaba announced a major reorganization, looking to split its company into six business units, in an initiative “designed to unlock shareholder value and foster market competitiveness.”
Over the past two years, China’s government has often railed against the “disorderly expansion of capital” of tech firms that have grown into large conglomerates. Part of Alibaba’s announcement noted that these splintered businesses could raise outside capital and even go public, seemingly heading in a contrary direction to Beijing’s concerns.
Efstathopoulos said that the move could indicate a green light from the upper echelons of the Chinese government.
“You have senior leadership blessing for unlocking value, and, to me, that is a fantastic indication where we are now essentially moving from regulation not being the issue that it was,” Efstathopoulos said.
Jack Ma’s return
Alibaba’s restructure isn’t the only sign that Beijing could be easing up its scrutiny of the tech sector. Jack Ma, the founder of Alibaba, returned to public view in China for the first time in months.
Some credit Ma with sparking the start of the tech crackdown in October 2020, when the billionaire made comments that appeared critical of China’s financial regulator. A few days later, Ant Group, the financial technology affiliate of Alibaba that was controlled by Ma, was forced to scrap its massive Hong Kong and Shanghai dual listing, after regulators said it did not meet the requirements to go public.
Following this, the Chinese government doled out huge antitrust fines to Alibaba and food delivery giant Meituan, introducing a slew of regulation in areas from data protection to the way in which companies can use algorithms.
Ma’s reappearance in Hangzhou, where Alibaba is headquartered, has been read as another sign of Beijing’s more positive view toward the tech sector and entrepreneurs.
“Jack just didn’t show up in Hangzhou because he was tired of traveling around. I think it was well orchestrated and fits with the government’s campaign to demonstrate that, you know, they are relaxing pressures on their private sectors and are welcoming the rest of the world,” Stephen Roach, a senior fellow at Yale University, told CNBC’s “Squawk Box Asia” on Tuesday.
Economic growth in focus
There have been further signs of regulatory easing over the past few weeks.
The gaming sector was hard hit in 2021, as authorities grew concerned about addiction among young people in China. Chinese regulators froze the approval of new game releases for several months. Last April, authorities began to green light new games, mainly from domestic firms. This month, the video game licensing regulator gave its stamp of approval to a batch of foreign titles for release in China.
Meanwhile, Chinese ride-hailing giant Didi — one of the companies caught up in the regulatory overhaul — announced plans to expand its business. Didi went public in the U.S. in June 2021, but found itself subjected to a cybersecurity review by Chinese regulators within days of listing. It eventually delisted from the New York Stock Exchange and plans to float in Hong Kong.
Over the last few days, foreign technology executives including Apple CEO Tim Cook and Qualcomm CEO Cristiano Amon visited China and met with government officials.
Jack Ma, founder of Alibaba, reappeared in the public view in China for the first time in months. Alibaba then announced a huge reorganization of its business. Experts see the move as a signal that the Chinese government is softening its stance toward tech giants after a crackdown that began in late 2020.
Jean Chung | Bloomberg | Getty Images
In addition to warming to the domestic tech sector, China is also courting foreign business. Its economy has been battered over the past two years, thanks in part to the country’s strict Covid policies and regulatory tightening. The government now aims for around 5% economic growth this year.
To achieve that, it will need the help of private businesses — including the tech sector.
“China is facing both weak economic growth and rising tech competition from the U.S. It’s a pretty tough position to be in. So they need the economy to fire on all cylinders. Tough regulations on big tech platforms just doesn’t make sense at this juncture,” Linghao Bao, tech analyst at Trivium China, told CNBC via email.
Is China tech out of the woods yet?
While there are promising signs for investors, there is also reason to be cautious, warned Xin Sun, senior lecturer in Chinese and east Asian business at King’s College London.
Sun describes the Alibaba reorganization as a move to “break up Alibaba’s business empire and to reduce its huge influence that could potentially pose a threat” to the Chinese Communist Party’s rule.
“After restructuring, the organizational structure of Alibaba will become more decentralized, and the control over its assets, data and resources will be less concentrated. The Party could then impose stronger political control over each of the new entity more easily,” Sun added.
He cautions against too much optimism around the Chinese technology sector. While the latest moves bring some regulatory certainty, many questions remain about how other tech giants might fare.
“In the short run, Alibaba’s restructuring might be perceived as the routinization of the government regulatory actions and provide some regulatory certainty for the sector,” Sun said.
“In the long run, however, it raises more questions about the fate of other tech giants. Will Tencent, Meituan, and ByteDance be broken up too? If so, do they make their own decisions or do they just wait for the order from the government? Such uncertainty will keep weighing on entrepreneurs and investors, undermining their confidence.”
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