Environmentalists and civic groups have been demanding the shutdown of Kremikovtzi steel mill on the outskirts of Sofia for years. In recent months, they have found a new ally to their cause - the global financial crisis, which has scared off potential suitors.

On October 27, six days after Vorskla Steel pulled out of a tolling agreement with the steelworks, under which it supplied raw materials in exchange for finished goods, and just two days after Economy Minister Petar Dimitrov confidently predicted that the mill had enough reserves to continue operating for another week, Kremikovtzi's management said that it had begun shutting down production facilities, including two of three blast furnaces and its coke oven battery.

The announcement has forced the Cabinet to scramble frantically to find anyone willing to keep the steel mill afloat for the duration of bankruptcy procedures in court. Less than six months ago, in its capacity as a shareholder with a 25 per cent stake in the mill and one of its biggest creditors, the Economy Ministry was in the enviable position of choosing between the world's largest steelmaker ArcelorMittal and Ukrainian billionaire Konstantin Zhevago, the owner of Ferrexpo, one of the world's largest producers of iron ore pellets, as the future owner of Kremikovtzi.

Since then, Ferrexpo's shares have nosedived, forcing Zhevago to sell 21 per cent in the company to pay back a JP Morgan loan earlier this month and throwing a spanner into his plans to buy Kremikovtzi, which has amassed a total debt of 2.2 billion leva. Vorskla Steel, which Zhevago controls, blamed Kremikovtzi's management for the failed tolling agreement, with the director of Vorskla's Bulgarian subsidiary, Viktor Demyanyuk, saying that it was still interested in taking over the steel mill, but he gave no further details. At the same time, Vorskla claimed that it was owed 9.8 million leva from the advance payment it made in August and 28 000 tons of steel, under the terms of the tolling agreement.

The Economy Ministry turned to ArcelorMittal, but its pleas went unanswered, the steel giant saying it would re-consider its position only if the Government was willing to make the concessions that the company insisted on. Just days later, the Financial Times reported that ArcelorMittal was reviewing its $35 billion expansion programme because of the global economic crisis. On October 29, Dimitrov said that the company notified the Cabinet that it was no longer interested in buying or operating Kremikovtzi, Bulgarian news agency BTA reported.

New bidders have emerged in recent days - Promet Steel, owned by Ukraine's richest man Rinat Akhmetov, who owes his $7.3 billion fortune to the coal-and-steel business in the Donetsk region, and the link-up between Intertrust, the company of Kremikovtzi's first private owner Valentin Zahariev, and steel trader Stemcor. Zahariev bought 71 per cent in Kremikovtzi for $1 in 1999 and sold the stake to Indian tycoon Pramod Mittal six years later in a deal thought to exceed $100 million, while Stemcor has been one of Kremikovtzi's main suppliers in recent years and is one of Kremikovtzi's biggest creditors.

While the talks went on, the two blast furnaces and the coke oven battery, which combined employ 60 per cent of the mill's payroll of 7000, were being shut down. Hundreds of Kremikovtzi workers blocked Rakovski Street in Sofia, one of the capital's busiest, on October 29, demanding that the Economy Ministry pay up the money needed to keep the mill operational.

Whoever is picked to operate the steelworks, they will have to come up with the raw materials needed to keep production rolling and will have to do so fast.