Another week has passed, but the future of the Kremikovtzi steel mill looks as murky as ever.

The only change is the Cabinet stepping in to bail out the steelworks by buying out the stores of steel for 25 million leva, money that would be used to cover the backlog of overdue wages that go back as far as August, which put an end to two weeks of protests by Kremikovtzi employees on the streets of Sofia.

But for all the reassurances from Prime Minister Sergei Stanishev, Kremikovtzi looked no closer to finding an investor willing to operate the mill while the protracted bankruptcy proceedings go on. Ukraine's Smart Group, in the process of being taken over by Ukraine's richest man Rinat Akmetov, is yet to make a firm commitment, with more news expected once company officials meet with Stanishev in the near future. Yet, considering that Akhmetov's own steel maker Azovstal has had to suspend pig iron production at one of its five blast furnaces earlier in November because of the fall in global steel demand, hopes appeared faint.

Kremikovtzi is by no means alone in its woes - steel maker Stomana Industry in Bulgaria's industrial town of Pernik, owned by Greek group Viohalco, has said that it would send employees on compulsory paid leave because the plant lacked orders. The company has already laid off 300 of its 1100 employees, but for now plans no further redundancies. Cast iron foundry Chougounoleene, which ships about 85 per cent of its production abroad, has said it would lay off a quarter of its workforce as Italian, French and German customers were cutting down on orders. Ore mining companies Roudozem and Goroubso have been forced to put hundreds of miners on compulsory leave because of falling prices and lower demand.

Against this backdrop, the words of Vassil Yanachkov, the head of the Metalitsi labour union at Kremikovtzi, that investor interest in the steel mill was high and new candidates could join the bidding, looked unjustifiably optimistic.

Price of failure
Even without the global financial crisis hamstringing commodity prices, Kremikovtzi's appeal is crippled by its 2.2 billion leva debt, of which close to a half is held by the Bulgarian state and state-run companies - state railways BDZ, power grid operator NEK and gas distributor Bulgargaz.

That, rather than the 25 per cent stake held by the Bulgarian state in the steel mill, has made all potential investors turn to the Cabinet to hold talks with, rather than the forgotten Indian tycoon Pramod Mittal, who holds 71 per cent of Kremikovtzi's shares, even before the court started bankruptcy proceedings in August. ArcelorMittal, the world's biggest steel maker, was said to have asked the Cabinet to guarantee that the steel mill would go through bankruptcy and pledged to buy its assets for $500 million, Kapital weekly reported. The offer had been rebuffed and ArcelorMittal later withdrew it. Should Smart Group ask for any sort of Government guarantees, it was likely to get the same treatment, Kapital said.

With the Cabinet unwilling to commit itself and the bankruptcy proceedings shaping up to go on for several more months, the only certainty in the near future appeared to be the imminent lay-offs at the steel mill. Over the years, Kremikovtzi's payroll has been slowly shrinking, now employing only about 5000 people, a third of the number it had in its heyday. The steel mill has shut down its two working blast furnaces and could do the same to its coke ovens, which could result in the dismissal of up to 1600 workers. The repercussions would be felt in the ports of Lom and Bourgas, for whom handling the shipments to and from Kremikovtzi is the bulk of their business, and the railways. By some estimates, the income of as many as 90 000 people depends on Kremikovtzi remaining in operation.

As the ripples from the global financial crisis begin being felt in Bulgaria, Kremikovtzi looks to be its first high-profile victim in the country. With elections looming in summer 2009, the Cabinet is unlikely to ignore the plight of the steelworks, but unless it takes the risk of nationalising Kremikovtzi, odds are that the mill will continue churning out more rust on unused production facilities than steel from its working ones.