Can a steel company build the infrastructure for the rapidly growing data center business? Nucor CEO Leon Topalian thinks so. Through a series of recent acquisitions, the company aims to offer customers made-to-order data center buildings with most of the components they require—cooling systems, overhead doors, equipment racks, and more—not just the steel that goes into them.
That’s just one of the many opportunities Nucor is pursuing. With a history of selling recycled steel that goes back to the company’s founder, today, Nucor offers net-zero steel at scale. Through partnerships with other companies and universities, it is seeking to expand the carbon-free energy options that power its operations. The company’s growth contributes to “reshoring” and infrastructure rebuilding in the United States. Its suite of strategies helps the company weather the notoriously cyclical steel industry.
Topalian was 29 years old when he joined Nucor as a project engineer for a plant in South Carolina. Nearly that many years later, Topalian heads the 32,000-person company that is the largest steel producer in North America and has appeared at the top of Fortune’s list of the most admired companies in its industry, thanks in part to its strong company culture.
Topalian recently spoke with McKinsey Senior Partner Thomas Seitz at Nucor’s Charlotte, North Carolina, headquarters. This interview has been edited for length and clarity.
McKinsey: To some, green steel may sound like a contradiction. How has Nucor positioned itself to be a producer at scale of clean steel?
Leon Topalian: Our founder, Ken Iverson, began the journey. He probably wasn’t thinking about recycling, but he wanted his own supply of metals—so he began to look at a technology called electric arc furnaces, which essentially involves taking metal from old refrigerators, cars, and buildings, cutting it up and putting it into a giant furnace with electricity, melting it down, and remaking the products of tomorrow, today. Since 1969, with our first mill in Darlington, South Carolina, we now operate 30 electric arc furnaces. About 75 percent of what we make comes through that recycled steel. We recycle over 20 million metric tons of steel annually, which makes us not only the largest recycler in North America but one of the top five in the world.
Steel is infinitely recyclable; the car you’re driving right now was probably a building in the past. That closed loop gives us a unique footprint advantage not only from a recyclability standpoint but also from a greenhouse gas standpoint. We have a 300 percent to 400 percent advantage in embedded carbon in our steels over integrated steelmaking (which is using coal-based ovens to produce steel from mined hematite and magnetite). The customers of tomorrow are demanding cleaner steels and a lower carbon footprint. We’re able to offer all of that today.
The customers of tomorrow are demanding cleaner steels and a lower carbon footprint. We’re able to offer all of that today.
McKinsey: When you took over as CEO, you announced clear—and very aggressive— sustainability goals for Nucor. That was a first for the company. Why did you do it?
Leon Topalian: Nucor was always comfortable being the small kid on the block. We were OK with not tooting our own horn. We let our results speak for themselves—and have for six decades. But when I took over as CEO, I knew that wasn’t enough.
What do leaders do? They lead. Part of leadership in sustainability comes through transparency: We were the first steel company to release our Scope 1, 2, and 3 data. We voluntarily committed to doing a sustainability report every year. We wanted to set the standard for clean steelmaking. We are a founding member of the Global Steel Climate Council, which is now the benchmark for how green steel is being made across the globe.
I’m tired of steel being grouped into the high-carbon-abatement category; I don’t think we’re a hard-to-abate industry. We are sitting today at 0.77 tons of CO2 per ton of steel produced. And we’re only getting better and cleaner. We’re going to continue to invest in technologies that will enable us to get to net zero.
McKinsey: One of these initiatives is your partnership with ExxonMobil on carbon capture and storage. ExxonMobil will capture, transport, and store the CO2 produced from your direct reduced iron [DRI] manufacturing site in Convent, Louisiana. How does that fit into your strategy?
Leon Topalian: Our partnership with ExxonMobil is one of the many roads we’re going down as we pursue sustainability.
The geology in Louisiana provides the right conditions for us to store our CO2. We’re looking to store somewhere between 600,000 and 800,000 tons of CO2 per year starting around 2026. But the real beauty of that is it will drop the embedded carbon of our DRI product by 50 percent, making it the lowest embedded carbon DRI anywhere in the world. We use that DRI as a feedstock into our furnaces across Nucor, so it is creating much lower Scope 3 emissions for our product.
McKinsey: What are some other sustainability avenues you are pursuing?
Leon Topalian: We’re investing in new technologies across the globe. We’re partnering with universities to look at our current core of burner technologies to make them even better. Another big area for us is in our Scope 2 emissions. We’re a high energy user. So we’re supporting advanced nuclear technologies—small modular reactors [SMRs] and companies like Helion that are doing fusion. We have to embrace nuclear as the cleanest, most reliable, affordable, at-scale power supply that exists anywhere in the world today.
Another arm is our partnering with Google and Microsoft to look at advanced energy projects to see what else is out there. What else can we be doing to bring these technologies to fruition? Stay tuned, because we’re at the leading edge of much of that.
McKinsey: Nucor has been named one of the most admired companies several times in the past few years. One of the key pieces of your operating model and culture is that everyone is a “team member,” not an employee. How do you ensure that Nucor’s culture and mindset remain consistent across the entire company?
Leon Topalian: When I first joined Nucor, I looked at myself as an employee, but I was called a teammate. My leader explained the important difference to me: “An employee has a job; a team member has a vested stake and personal ownership in the future direction of the company.”
My job as CEO is to serve this team; it’s not the other way around. And that flows all the way down. A general manager in Jewett, Texas, is also thinking about how to make things better for the 300 or 400 team members in that community. When you have that, and you are aligned to a common vision and strategy, amazing results happen. One of the benefits is that the last six years have been the safest years we’ve ever had in our history.
We’ve made many acquisitions in the last five years, so there are a lot of new team members who are still learning Nucor’s culture. How we think about acquisitions today is different from 20 years ago. In the past, we’d ask someone to lead a new division that we had just acquired, and we’d say, “Convert it all to Nucor’s culture and let us know how it works out. Good luck.”
Today, we’re taking a much more holistic view. We’re putting an integration team in place. We’re putting many people at different levels of the organization into that entity so that the new team members can understand: How does Nucor pay? How does our production bonus system work? How do our benefits work? How do we think about caring for the team? What does the value of safety actually mean in our results? We’ve got to consistently make that Nucor culture tangible to every one of our team members, including those from the companies we acquired in recent months.
McKinsey: As you said, Nucor has made many acquisitions in recent years. Do you have a framework for striking a balance between organic growth and M&A?
Leon Topalian: We do. Our mission statement is very simple: “Grow the core, expand beyond, and live our culture.” We are the market leader in 12 of the roughly 15 major steel segments in the United States, so how do we grow the core? It’s not so easy anymore, but we take a very hard look at the core. We evaluate opportunities where we think we have some capability sets that might be helpful for a customer segment. We’re building the most advanced state-of-the-art sheet mill in West Virginia, for example, that gives us a unique footprint in that region.
Then, to expand beyond, we are looking at adjacent businesses that have great returns, great cultures from a people perspective, and a countercyclical effect to steel to shrink the earnings volatility of the overall Nucor portfolio and provide more consistent returns to our shareholders. We’re looking at mega trends: What do the next ten or 15 years look like?
Data center growth has become a key trend in the US and globally. These data centers are massive buildings that can have anywhere from ten to 60 overhead doors. Now, with our acquisitions of C.H.I. and Rytec, we can provide those doors. Nucor is moving from selling products to selling solutions. We can sit down with hyperscalers and say, “What do you need?”—and we can offer them nearly an entire package solution. We’re making the building: the joists, the deck, the bolts, the purlins, the racking, the containment storage areas for cooling, and just about everything in between.
We continue to bring companies into Nucor through acquisitions that fit models like the data center solutions to provide more and more offerings to the ultimate end customer. “Just tell us where you want it, how big, and we take it from there.”
McKinsey: You make it sound so easy to expand beyond, but it must have been difficult expanding from steelmaking to data centers, to renewables, and to specific building components. What were some of the challenges?
Leon Topalian: There are many companies out there, so you must be disciplined to really understand, first, the cultural impact of an acquisition. Second, we always ask ourselves, can we grow it? Are there segments that we can continue to invest in to scale up the target company so it can become either the industry leader or a very close second? Third, are you looking at paying a premium for the acquisition, and can you justify that premium?
So there are challenges, but I would tell you, there are far more opportunities. And, again, our growth is purely for growth—it’s not because we have to pivot from a broken business model. Nucor has made more money in the past three and a half years than in the past 20 years combined, so our earnings profile and our financial performance have never been better. We have the luxury of being incredibly selective and disciplined in how we use our shareholder capital.
McKinsey: Let’s shift gears a little. Can you talk about your leadership journey through Nucor, from process engineer to head of the company? What’s an example of how you’ve changed?
Leon Topalian: There are probably 100 examples that I could give you. But look, 25 years ago, I wasn’t patient. I wasn’t a great listener. I had to learn and develop those skills. I had to understand how to ask better questions and different questions of our team to be able to help them achieve their very best.
Twenty-five years ago, I wasn’t patient. I wasn’t a great listener. I had to learn and develop those skills.
An individual’s growth or a leader’s growth doesn’t happen in the quiet, in the calm, and in the ease. It happens in the tough, and the chaotic, and sometimes painful lessons. One of the most important leadership lessons I’ve learned is that it’s not about the pace at which you can run, but can your team keep up with you?
The other change is learning to be confident in my vulnerabilities. Today, I would tell you I am incredibly comfortable not being the smartest guy in the room. I want to be surrounded by really bright, intelligent, competent people who help me make better decisions.
The last thing I would tell you, in a much lighter sense, that I’ve learned about myself is that my ability to pivot and manage my time has grown exponentially. If I have five minutes between meetings, that’s an eternity now. You’d better be a great manager of the few minutes you get every day.
McKinsey: You became Nucor’s CEO on January 1, 2020. Tell us about the huge challenge of taking over just before COVID-19 upended the world and what leadership lessons you have carried beyond the pandemic.
Leon Topalian: In late February 2020, I was talking to one of our executives on a Sunday afternoon. I said, “I’d like you to stand up a COVID task force. Bring some people in. I want you to find an infectious disease doctor to bring onto this task force because I think this thing may stay with us a little while.” I said this having no idea how devastating COVID would be—having no idea that a few weeks later, it would take the life of my father and affect so many thousands of team members’ families and so many millions across the globe.
Those early days forced us to do many things differently. For example, live streaming was an incredibly effective way to communicate with our 32,000 team members. We still do that every February: I live stream a “state of the union” address to our team, and we take questions.
We started a call every Friday morning from 9:00 to 10:00 a.m. with our 100 general managers across the entire company, to be able to talk in real time about what was changing with COVID. What were the implications, from New York, to Washington, to Texas, and Alabama, and everywhere in between? Five years later, that call still happens every week. What are the outcomes in trade, policy, imports, and competitive positioning that we need to better understand? It has become my most important meeting.
McKinsey: When other companies were laying off people and shutting down manufacturing plants, you gave your production team 70 percent guaranteed weekly minimum pay, even if production was stalled. As a new CEO, how did you come to make that decision?
Leon Topalian: It was our executive team’s recommendation, and I fully agreed. Having just a few weeks under my belt, I was very nervous. What I will tell you is it paled in comparison to the relief that it gave our team. They didn’t have to worry about making their mortgage payments or their kids’ college tuitions. They could focus on the task at hand: safely making the little bit of steel we had to make during that time. When you talk about loyalty, it comes in different forms, but it’s never because of Nucor’s name or balance sheet. That loyalty is generated because someone took an active interest in an individual and made an impact in their life.
