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Formula 1’s expansion in the U.S. is in motion, now it needs a star American driver

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Lewis Hamilton of Great Britain driving the (44) Mercedes AMG Petronas F1 Team Mercedes WO9 leads Max Verstappen of the Netherlands driving the (33) Aston Martin Red Bull Racing RB14 TAG Heuer on track during the Formula One Grand Prix of Great Britain at Silverstone on July 8, 2018 in Northampton, England.

Charles Coates | Getty Images

Formula 1 finally landed a new racing venue in the United States after roughly five years of effort from its owner Liberty Media.

Formula 1 will race the next decade in the Miami market after securing a venue and landing financial backers. And with the move, parent company Liberty Media‘s U.S. strategy is taking shape.

“Now things are coming together,” said Chris Lencheski, chairman of private equity consulting company Phoenicia.

“It’s going to be huge for the series, especially here in the United States,” added legendary motorsports driver Michael Andretti.

F1 agreed to a 10-year deal to bring a second race to the U.S. last weekend. Financials of the deal weren’t released, but motorsport insiders estimate F1 netted in the range of $17 million to $20 million per year under the pact. The Miami Grand Prix will join the U.S. Grand Prix in Austin, bringing four total races to North America as F1 also races in Canada and Mexico.

“The USA is a key growth market for us, and we are greatly encouraged by our growing reach in the US which will be further supported by this exciting second race,” said new F1 CEO Stefano Domenicali in a statement.

Lencheski credited former F1 CEO Chase Carey “for seeing this through” before relinquishing the role and taking a non-executive chairman title. He added Liberty Media would benefit as the race gives it access to a prominent South Florida market that favors top F1 automakers like Ferrari and Aston Martin.

But the next step in F1’s U.S. play could be essential.

“If I’m the CEO of Formula 1, I’m doing all I can to get an American driver in the seat and successful,” Lencheski added.

F1 could use help in the U.S.

Lencheski served as CEO of sports and entertainment marketing firm SKI & Company before selling the agency in 2008. The company formulated F1 sponsorships.

He said for F1 to market effectively market in the U.S., having a native driver would be critical in a sport fueled with nationalism, as it travels worldwide.

Currently, there are no American drivers in F1. Michael Andretti’s father, Mario Andretti, is the most successful American driver to dominate F1, winning the 1978 championship.

And Gene Haas’ F1 team is the only American team in F1 but has no American drivers, something U.S. drivers long ago noticed.

Pole position qualifier Lewis Hamilton of Great Britain and Mercedes GP looks on in parc ferme during qualifying ahead of the F1 Grand Prix of Emilia Romagna at Autodromo Enzo e Dino Ferrari on April 17, 2021 in Imola, Italy.

Mario Renzi | Formula 1 | Getty Images

United Kingdom native Lewis Hamilton is the most popular driver in F1. But Hamilton is 36, and the retirement chatter has started. He only signed a one-year deal to drive for Mercedes, further fueling speculation about his future.

“I don’t feel like I’m at the end but only in the next eight months or so I’ll find out whether I’m ready to stop or not. I don’t think I will, personally, but you never know,” Hamilton told F1’s website in March.

With Hamilton nearing the end, Lencheski nominated American IndyCar driver Colton Herta as a driver that could convert and thrive in F1 as a future star.

“He’s already proven he can win in IndyCar,” Lencheski said. “He’s won on the Formula 1 circuit in Austin. He’s lived in Europe training, and he’s the correct age.”

The Andrettis concurred.

Said Mario Andretti on Kyle Petty’s show: “As a young lad, his dad sent him to Europe, he was doing Formula 3, and he knows most of the circuits there, for one thing, and he’s trained. He’s showed in his rookie season in IndyCar, and he won some premium races like (in Austin) … beat two of the very best Indy has to offer. The entire race, he held off Will Power and Scott Dixon. This is one kid I’d love to see him get a break over there because to the U.S. colors again – Formula 1 is like the Olympics in a sense.”

Colton Herta waits on the award stand after winning the IndyCar Series auto race, at Mid-Ohio Sports Car Course, Sunday, Sept. 13, 2020, in Lexington, Ohio.

Phil Long | AP

Michael raced in the 1993 F1 World Championship series. He also praised F1 for building on their brand, which includes a streaming series to educate and generate new fans in the U.S.

“I think Liberty has done a lot of good things with the F1 series, including that Netflix show,” Andretti said. “That has done wonders for F1 and people understanding more what it’s about.”

Tracking the F1 stock 

Liberty, which also owns the Atlanta Braves, purchased F1 in 2016 for $4.4 billion, gaining access to a global fan base of over 400 million. It trades F1 as a tracking stock under the ticker “FWONA” on the Nasdaq. Tracking stocks are used by companies to track the success of a particular division in its portfolio.

With attendance restricted due to the pandemic, F1 revenue declined from $523 million to $485 million in 2020, according to its fourth-quarter earnings report. Liberty CEO Greg Maffei also linked the F1 stock to a $575 million special purpose acquisition company, searching for companies including digital media properties to take public.

A key metric on the report: There’s an average 87.4 million viewers per race. It’s a global stat, as over the years, F1 struggled in the U.S. market. F1 did not race in the U.S from 2008 to 2011 before returning with the U.S. Grand Prix in 2012 after a track was built in Austin. And part of Carey’s mission was to build on the U.S. market; hence, adding Miami and growing the media market.

ESPN returned F1 to its lineup in 2018 and pays the organization a rights fee though Comcast‘s Sky Group and F1 produce the races. It’s growing slowly on the viewership front.

The 2021 series opener, the Bahrain Grand Prix, saw an average of 879,000 viewers tune into the network’s ESPN2 channel on April 4. The second race in Italy attracted 905,000 average viewers, according to ESPN. And before the pandemic, F1 averaged 671,000 viewers in 2019 on ESPN channels, up from 554,000 viewers in 2018.

F1 could also be looking to expand on the media front, and Amazon could be in play, according to the Financial Times.

But F1’s future in Austin’s Circuit of the America is in question. The deal is set to expire after the 2021 season. The track sold out its 2019 race, missed 2020 due to the pandemic and is set to host this year’s event in October, part of a 23-race schedule.

Should it remain in Texas and thrive in Florida, Lencheski forecasted more U.S. expansion.

“If they bring an event to Las Vegas or the Pacific Northwest, it will sell out there, too,” he said.

F1 did not provide an official for this article after a CNBC request.

Teammate Mercedes AMG Petronas Motorsport driver Valtteri Bottas (77) of Finland pours champagne on the head of Mercedes AMG Petronas Motorsport driver Lewis Hamilton (44) of Great Britain after clinching the 2019 FIA Formula 1 World Championship following the F1 – U.S. Grand Prix race at Circuit of The Americas on November 3, 2019 in Austin, Texas.

Ken Murray | Icon Sportswire | Getty Images

F1 could get more competitive 

But whether the world’s top motorsport company will capitalize on the U.S. market is unclear. Michael Andretti said the newly installed salary cap would help balance the sport.

F1 established a new cost cap system, limiting teams’ spending. Think of it like the National Football League or National Basketball Association salary cap. For the 2021 season, it’s $145 million and fluctuating after the year. Hence, with a balanced field, bigger brand cars’ teams can’t outspend to win.

Michael Andretti, who himself is a part of a SPAC, Andretti Acquisition Corp., targeting the automotive industry, likes the cost cap system, believing smaller teams will benefit.

“They know how to deal with a smaller budget so they won’t have to downsize, whereas the bigger teams will need to learn how to downsize,” he said. “It’s going to be quite interesting to see what happens a couple of years down the road. I really believe the competition is going to get a lot better.”

“They should be very bullish about their future,” Michael added, “especially here in the U.S.”

Disclosure: Comcast is the parent company of NBCUniversal.

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Cases, fatalities rise as oxygen shortage persists

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A Covid-19 coronavirus patient breathes with the help of oxygen provided by a Gurdwara, a place of worship for Sikhs, under a tent installed along the roadside in Ghaziabad on May 6, 2021.

Prakash Singh | AFP | Getty Images

India once again reported a record number of cases and fatalities on Thursday as it faces a devastating second wave of Covid-19 infections that has pushed its health-care system to the brink of collapse.

Health ministry data showed there were 412,262 new reported cases of infections over a 24-hour period, pushing the total tally to over 21 million — days after crossing the 20 million mark on Tuesday.

India also reported its highest daily death toll, with 3,980 fatalities. But media reports suggest that the death rate is being underreported.

Prime Minister Narendra Modi’s government is facing criticism for allowing large crowds to gather for election rallies and religious festivals earlier this year as well as for failing to anticipate or prepare for a second wave.

India’s oxygen crisis

“That means essentially the requirement for oxygen (is) also moving up,” he said Tuesday on CNBC’s “Street Signs Asia.

“Typically an ICU requires two-and-a-half to three times the amount of oxygen a ward or a patient in a bed requires. So, as criticality moves up, as mortality moves up, you are going to see the requirement of oxygen also move up,” he said.

Soi explained that Max Healthcare conducts about 4,000 RT-PCR tests in the Delhi area per day and about a week ago, those Covid-19 tests had a positivity rate of over 50%, which has since come down to about 31%.

“So what you are going to see right now is people who were infected about seven, eight days ago, coming into hospitals,” he said, adding these patients need a host of medicines and support, including oxygen.

Courts step in

On Wednesday, India’s Supreme Court ordered the central government to present a comprehensive plan by Thursday outlining steps it will take to meet medical oxygen requirements for hospitals in Delhi, including sources of supply and transport provisions. The country’s top court also stayed a contempt notice issued by the High Court of Delhi on May 4 to the central government for not complying with its orders to supply sufficient oxygen to hospitals in Delhi.

Delhi high court justices Vipin Sanghi and Rekha Palli noted on Tuesday that hospitals and nursing homes have had to reduce the number of beds offered because they are unable to service their existing capacities due to a shortage of medical oxygen.

The National Capital Territory of Delhi, which includes India’s capital New Delhi, is one of several areas that saw a rapid surge in cases, forcing the local government to step up restrictions to try and break the chain of transmission.

Logistics issue

India has sufficient oxygen available, but the main issue lies around logistics, according to Siddharth Jain, director of Inox Air Products, one of India’s prominent industrial and medical gases manufacturers.

Jain told CNBC’s “Street Signs Asia” on Wednesday that the country’s oxygen manufacturers have stepped up production by more than 30% in recent weeks. He said over 9,000 tons of oxygen is available in India per day while consumption of medical oxygen is slightly higher than 7,500 tons.

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Vaccinated people who had Covid may have more protection against variants

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Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, speaks during a White House press briefing, at the James Brady Press Briefing Room of the White House January 21, 2021 in Washington, DC.

Alex Wong | Getty Images

People who have had Covid-19 and later got vaccinated may have more protection against highly contagious variants, White House chief medical officer Dr. Anthony Fauci said Wednesday.

Fauci cited a study published in late April that found that after one dose of the PfizerBioNTech vaccine, people with prior coronavirus infections had better immune responses against B.1.1.7 and B.1.351, the variants first identified in the U.K. and South Africa, compared with those who hadn’t had Covid.

He cited an additional study, which was published online and not yet peer-reviewed, that found people with prior infections who were later boosted with two doses of an mRNA vaccine had “increased protection” protection against variants.

The studies provide more evidence on the benefits of getting vaccinated, Fauci said.

“Vaccines are highly efficacious,” Fauci said during a White House Covid briefing. “They are better than the response you get from natural infection.”

His comments come amid the Biden administration’s push to get 70% of U.S. adults partially vaccinated and 160 million adults fully vaccinated by the Fourth of July, a date the administration hopes will be a turning point in the pandemic.

In recent weeks, the pace of individuals receiving their first vaccine doses has fallen, though U.S. health officials say they are working to improve access to the shots as well as encourage more hesitant Americans to get vaccinated.

Earlier Wednesday, the Centers for Disease Control and Prevention published a new report that projected Covid-19 cases would surge through May before sharply declining by July as vaccinations drive down infections.

Highly contagious variants, namely the highly contagious B.1.1.7 first identified in the U.K., remain a wild card, U.S. health officials said, urging Americans to get vaccinated and practice pandemic safety measures.

“We are seeing that our current vaccines are protecting against the contaminant variants circulating in the country. Simply put, the sooner we get more and more people vaccinated, the sooner we will all get back to normal,”  CDC Director Dr. Rochelle Walensky said during the press briefing.

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Copper is ‘the new oil’ and could hit $20,000 per ton, analysts say

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A worker labels copper products at Truong Phu cable factory in northern Hai Duong province, outside Hanoi, Vietnam August 11, 2017.

Kham | Reuters

The world risks “running out of copper” amid widening supply and demand deficits, according to Bank of America, and prices could hit $20,000 per metric ton by 2025.

In a note Tuesday, Bank of America commodity strategist Michael Widmer highlighted inventories measured in tons are now at levels seen 15 years ago, implying that stocks currently cover just over three weeks of demand. This comes as the global economy is beginning to open up and reflate.

“Linked to that, we forecast copper market deficits, and further inventory declines, this year and next,” Widmer said.

“With (London Metal Exchange) inventories close to the pinch-point at which time spreads can move violently, there is a risk backwardation, driven by a rally in nearby prices, may increase.”

Backwardation is when an underlying asset is trading at a higher price than the futures market for that asset.

Widmer also highlighted that a rise in volatility resulting from falling inventories was not without precedent, since nickel shortages in LME warehouses in 2006/7 drove nickel prices more than 300% higher.

Given the fundamental environment and the depleted inventories, Widmer suggested that copper may spike to $13,000/t in the coming years after notching $10,000 last week for the first time in a decade.

Copper prices stood at just under $4.54 per pound as of 5:30 a.m. London time on Thursday, up 30% for the session.

After deficits in 2021 and 2022, BofA expects the copper market to rebalance in 2023 and 2024 before fresh shortfalls and a further draw down on inventories kick in from 2025.

“In our view, scrap supply is critical and our analysis suggests that scrap usage at smelters/refiners could increase from around 4,200t in 2016 to 6,700t by 2025,” Widmer said.

“If our expectation of increased supply in secondary material, a non-transparent market, did not materialize, inventories could deplete within the next three years, giving rise to even more violent price swings that could take the red metal above $20,000/t ($9.07/lb).”

‘The new oil’

Along with the broader economic recovery, demand for copper is also being boosted by its vital role in a number of rapidly growing industrial sectors, such as electric vehicle batteries and semiconductor wiring.

David Neuhauser, founder and managing director of U.S. hedge fund Livermore Partners, told CNBC on Wednesday that metals were receiving a general tailwind from a weaker dollar and increasing moves toward green infrastructure.

Commodity prices rose 3% in April, taking the global index up 80% since April 2020, and HSBC commodity analysts highlighted in a note Wednesday that demand for copper is being supported by investment in electrification as emission reduction strategies are further bolstered by policymakers.

Copper remains Livermore’s favorite commodity at present, Neuhauser said.

“I think copper is the new oil and I think copper, for the next five to 10 years, is going to look tremendous with the potential for $20,000 per metric ton,” Neuhauser said.

“We think there are some very solid small cap companies that have massive production potential, and valuations are attractive, and Livermore could make great return on investment.”

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