Steel plant demands backfire on French government

The French government was struggling to avoid humiliation yesterday after being dealt a setback in its attempt to save the country’s last steel furnaces from closure.

The fate of the ailing ArcelorMittal steelworks at Florange, in the former industrial heartland of northeastern France, has become one of the most sensitive domestic issues facing President François Hollande since he came to power in May.

It has tested the government’s pledge to revive French industry, caused a furious row with the multinational that controls the plant and led to calls for the resignation of the industry minister.

The dispute began in September with reports that ArcelorMittal, 40 per cent of which is owned by India’s Mittal family, would shut two idle furnaces at the plant – the last survivor in a region synonymous with the steel industry. The company blamed a fall in European demand for low-end steel products for the move, which would result in 630 layoffs.

Idle furnaces

Mr Hollande, who had promised during his election campaign to get the two idle furnaces reopened, immediately came under pressure to intervene. The government duly ordered ArcelorMittal to restart the furnaces or put them up for sale, and threatened to nationalise the whole site, including facilities producing higher-end products that the company wanted to keep.

The standoff between the government and the Indian steel magnate Lakshmi Mittal has grown increasingly bitter. Industry minister Arnaud Montebourg has declared Mr Mittal persona non grata in France and last week claimed to have found a buyer for the site.

However, the prime minister’s office later briefed media that this putative investor was neither “credible nor sound”, leading to opposition calls for Mr Montebourg to resign.

The government’s threat to nationalise the plant has echoed widely.

In New Delhi last week, mayor of London Boris Johnson told executives that “revolutionaries” had taken control in Paris and advised them to invest in Britain instead.

Elie Cohen, an economist at the CNRS public research institute, said that by raising the option of nationalisation, Mr Montebourg risked encouraging copy-cat demands by workers at other struggling sites.

Five-year plan

Ministers said last weekend they had struck a compromise deal with Mr Mittal, under which the company agreed to invest €180 million to expand the site over five years and hold off making forced redundancies.

The accord appeared to be unravelling yesterday, however, when ArcelorMittal withdrew an application to use Florange for an EU pilot project in low-polluting steel – the key to making the site economically viable.

Both sides insisted the deal was still on, but trade unions and local politicians reacted angrily.

CFDT union leader Edouard Martin told French media that ArcelorMittal had “misled everybody” and vowed to restart the fight to keep Florange operational.

The dispute has badly strained relations between the government and unions, threatening Mr Hollande’s hopes of persuading the unions to accept labour market reform proposals he is due to table early next year.