Steel and mining company ArcelorMittal is closing two mothballed furnaces in northeastern France.
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.
Arnaud Montebourg, France's Minister for Industrial Renewal, said he strongly disagreed with the decision and would do his utmost to ensure that ArcelorMittal made a genuine effort to ensure a buyer was found.
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 were, union representatives said, prepared to keep the protest going for days. They welded shut the metal entrance gate to corporate offices and blocked external access to the whole site.
"This is what I call murder," Edouard Martin, a Florange worker and one of the union leaders at the forefront of the battle to save the plant, told local media.
"For 14 months, they were telling us the closure was temporary. There is a lot of anger," Martin of the CFDT union said. "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, shut off in July and October 2011 due to low demand, are not viable when demand is weak because of their small size and distance from the coast, which makes the transport of raw materials more expensive.
A former senior executive at ArcelorMittal said 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. To imagine that somebody could be interested in buying them is pure fantasy. And to sell the whole plant would be absurd," he said.
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 in Liege are also set to shut permanently.
Steel use is set to dip 1.2 per cent this year in the European Union, where demand is around 25 per cent 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 operational, President Francois Hollande put the endangered furnaces on the political map by visiting the site during his election campaign earlier this year.
With unemployment a major factor in a drop in his approval ratings to as low as 43 per cent, he met Mittal last week to urge him to rethink the closure.
Montebourg said France would deploy its diplomatic network in the quest for a solution and also a state agency that promotes foreign investment in the country.