ArcelorMittal told unions it will permanently close two mothballed furnaces in northeastern France, enraging workers who blocked access to the steel plant and management offices at the site on Monday.
In a blunt response to the Socialist government's demand last week that it restart or sell the furnaces, ArcelorMittal said it would give the state a two-month window to try to find a buyer before it shuts down the site.
"After four years of economic difficulties, we cannot hope for any return in the short term to pre-crisis activity levels," ArcelorMittal, the world's biggest steelmaker, said.
It said the closure would affect 629 workers out of a total 2,700 at the Florange plant, near the German border, and said it would try and move as many as possible to new jobs.
Workers at the plant, which has become symbolic of France's entrenched industrial decline, wept and hugged each other as management announced the decision to union leaders at a meeting in the Paris suburbs.
Some workers lit a fire, erected a tent and said they would stay overnight. They welded shut the metal entrance gate to corporate offices and blocked external access to the whole site.
"For 14 months, they were telling us the closure was temporary. There is a lot of anger," local CFDT union representative Edouard Martin said at the site. "We need the government to fight alongside us and do everything it can to make Mr. Mittal stop his scrapheap strategy."
Despite ArcelorMittal chief executive Lakshmi Mittal's consent to selling the furnaces if the government can find a buyer, the issue lies with flagging demand, largely from the stagnant auto sector unlikely to revive any time soon.
Industry insiders say the furnaces - which were shut off in July and October of 2011 due to low demand - were not viable when demand is weak because of their small size and their distance from the coast, which makes the transport of raw materials more expensive.
ON THE POLITICAL MAP
A former senior executive at ArcelorMittal told Reuters it was very unlikely a buyer could be found for the furnaces alone, as the government hopes, and saw no reason why the company would consider selling the plant as a whole.
"When you have overcapacity like today, the furnaces become economically impossible," he said. "To imagine that somebody could be interested in buying them is pure fantasy. And to sell the whole plant would be absurd."
FO union representative Walter Broccoli also told reporters he could not see a buyer being found.
ArcelorMittal has idled seven of the 25 blast furnaces in its Flat Carbon Europe division - the two at Florange, two in Liege, Belgium and three in Germany, the Czech Republic and Romania. The two at Liege are also set to shut down permanently.
Steel use is set to dip 1.2 percent this year in the European Union, where demand is already around 25 percent below 2007 levels, according to the World Steel Association.
In France, the slump in activity in the industrial belt around Florange is weighing on unemployment, which rose in August to above the 3 million level for the first time since mid-1999.
While the rest of the Florange plant is still operational, President Francois Hollande put the endangered furnaces on the political map by visiting the site during his election campaign earlier this year.
With rampant unemployment a major factor in a drop in his approval ratings to as low as 43 percent, he met Mittal last week to urge him to rethink the closure.
Industry Minister Arnaud Montebourg had said on Sunday the government was seeking contacts with leading steelmakers.
(Additional reporting by Gilbert Reilhac in Strasbourg and Julien Ponthus in Paris; Writing by Catherine Bremer; Editing by Dan Lalor)