As of August, many steel producers and traders owe debts of trillions of dong, which they are finding difficult to repay.
Haiphong steel plants struggling
A bank official in Haiphong said banks have begun to be cautious about giving loans to companies in the steel industry.
"At the moment, lending to these firms carries great risks because the construction industry is slowing down. Now we are requiring that steel firms put down collateral to guarantee loans," he said.
Mounting debts
Banks’ tightened credit policies have added to difficulties faced by steel firms in Haiphong. In July 2011, steel refining plants of Van Loi Steel Joint Stock Company had to deal with power outages because they had not paid VND11.2 billion (USD537,538) in electricity bills.
According to the social welfare agency in Haiphong, by the end of July 2011, Van Loi enterprises had owed over VND6.7 billion (USD321,589) in benefits for its employees.
In July 2010, when Van Loi floated its shares on the Over the Counter floor, they declared to had 14 subsidiaries and an expected annual revenue of VND10 trillion (USD480 million). However, the situation now is much less optimistic.
Many other steel firms in the city, such as Dinh Vu Steel Joint Stock Company, Song Da Steel Refining Joint Stock Company and Cuu Long Vinashin Steel Joint Stock Company are in a similar situation.
Reluctance to distrain
Most steel projects in Haiphong have an annual capacity of between 300,000 and 500,000 tonnes. But most of them have to take out loans from banks to continue operations.
The director of one steel company said that the industry in Haiphong owes a combined VND4 trillion (USD192 million).
Still, banks are reluctant to put the loans into default, in hopes that the industry may recover soon.