Steel industry wonders how to sell to customers who are out of business.

The erosion of the U.S. office furniture industry and dozens of other steel-intensive industries is beginning to impact U.S. steel producers, according to Bob Johns, marketing director of Nucor Corp. "Nucor happens to be the most efficient steel producer in the world, but quite frankly, there's

Nucor believes China's currency is undervalued by 56 percent versus the dollar. That means an office desk made in China that sells for $300 in the United States would cost more than $450 if the currency were fully convertible. "The consequences for the U.S. furniture industry competing with the Chinese are obvious," Johns said.

Unfortunately for industry, the U.S. government is not willing to act in its defense, Johns asserted. "The Treasury Department claims that China isn't manipulating its currency through the convenience of a very narrow definition of the word manipulation," he explained. "Whether intervention or manipulation, I don't care what you call it, it's clear that they're setting the exchange rate at such a low level it's costing the United States tens of billions of dollars a year in lost sales, lost profits, lost wages, lost tax revenues, higher government expenditures for laid off workers and it goes on and on."

China has added more steel capacity in the last three years than the entire United States industry has the ability to produce, said Johns. That capacity is feeding China's voracious market, but when there is a downturn, "that capacity will eventually find a home and we strongly suspect it will start here."

Some of this capacity is coming from U.S. companies that have gone into bankruptcy. "China is buying steel mills in the United States that are shut down and are supposedly inefficient in the United States to operate," said USCC commissioner George Becker.

One plant in Northern California closed "and the workers there faced the further indignity of the Chinese insisting on bringing in Chinese workers to dismantle the mill so that the workers didn't even get paid for taking apart what it was that they had been doing," added commissioner Carolyn Bartholomew. "You sell your mill and you sell your jobs and you don't even get the income out of taking it apart."

China's government is supplying the capital for its capacity surge, said Johns. Tens of billions of dollars of loans have flowed from state-owned banks into state-owned companies "allowing them to fund enormous investments and this way the Chinese government created much of the manufacturing capacity that has enabled Chinese manufacturers to swamp the U.S. with low-priced imports," Johns told the commission members. Much of this capacity is inefficient. "You can't walk through the steel district [in China] and see the other side of the street, it's that polluted," said Johns. "We import a ton of steel and a ton of pollution."

Nucor executives recently returned from a tour of Chinese mills and found that a relatively new facility there employs 15,600 people to produce 3.1 million tons of steel. To produce the same amount of steel at a Nucor plant takes no more than 750 employees.

"This isn't an issue about productivity and labor costs," said Johns. "Our labor costs are about one-third of what it costs in ocean freight to bring steel here. This is about subsidy. It's about when the banks don't collect on the loans. I'm sorry, but Wachovia collects on our loans."

The U.S. government needs to respond "firmly" to China's currency manipulation because "this is not something businesses can do," Johns said. "We are in an accelerated spiral. I think the flushing sound in this hemisphere is clockwise when a business goes down the toilet."