Kremikovtzi drops Arcelor for Ukraine deal-unions

SOFIA, July 11 (Reuters) - Bulgaria's ailing Kremikovtzi KMKV.BB has cancelled a production agreement with the world's largest steelmaker Arcelor Mittal (ISPA.AS) (MTP.PA) and sealed a deal instead with Ukraine's Vorskla Steel, a senior trade union official said on Friday.

Kremikovtzi and Vorskla Steel, controlled by Ukrainian billionaire Konstynatin Zhevago, declined to comment and said a statement was likely later on Friday. ArcelorMittal was not immediately available for comment.

"Although with difficulties, the majority of the board of directors of Kremikovtzi signed the agreement with Vorskla Steel late on Thursday and cancelled the one with Arcelor," said Konstantin Trenchev, head of the independent Podkrepa trade union.

The deal with Arcelor was announced last Friday.

ArcelorMittal and Zhevago are vying to take over Kremikovtzi, which accounts for 10 percent of Bulgaria's exports but which faces insolvency after its debts ballooned to 1.7 billion levs ($1.37 billion).

Under the deal Vorskla Steel will provide raw materials to Kremikovtzi's mill to produce steel and make urgent payments of delayed salaries and environmental upgrades.

About 2,000 workers protested at Kremikovtzi's headquarters on Thursday, pressuring the mill's management to sign a deal with Zhevago.

"ArcelorMittal is not delivering on its pledges. Neither raw materials have arrived, nor salaries have been paid," said Trenchev.

The news pushed Kremkovtzi's shares up 7.88 percent to 2.6 lev in thin morning trade at Sofia's bourse. (Reporting by Tsvetelia Ilieva; Editing by David Cowell)