The French government and steelmaker ArcelorMittal are aiming to clinch a deal to save jobs and avoid a temporary nationalisation of the company's Florange steelworks, government sources said on Friday as a midnight deadline neared.
The talks came as the Italian cabinet was meeting to approve a rescue plan for ILVA, Europe's largest steel plant with 20,000 workers, which is threatened with closure after an alleged environmental disaster.
The European steel industry is struggling with overcapacity at a time of recession in the euro area and cheap competition in emerging markets.
ArcelorMittal says the Florange site's two furnaces are not viable but Socialist President Francois Hollande wants them kept open and has threatened a controversial state takeover for the site in northeastern France if no private buyer is found.
The two furnaces together employ 600 workers with the entire site providing work for 2,700. Sources close to the negotiations said talks could stretch beyond the deadline set for an accord by ArcelorMittal.
"It's probably set for Saturday," one of the sources said of a possible agreement. Neither ArcelorMittal nor the government has commented publicly on the chances of compromise. Hollande has said his main objective is to secure jobs.
"My aim is to find a long-term solution in terms of both jobs and activities for the Florange site," he told reporters on a trip outside Paris late on Thursday, declining to give details of how a compromise could emerge.
A deal this weekend could bring concessions from both parties, including promises from ArcelorMittal to offer new jobs to all workers affected by a shutdown of the furnaces and large new investments in France, Les Echos business daily reported.
The compromise could save face for Hollande's government, which is struggling to stem a glut of industrial layoffs and has faced criticism from business leaders this week over its threat to nationalise Florange.
Alternatively the state could carry out plans to acquire the whole site with a private co-investor and seek to revamp the idled furnaces using European Union credits to produce environmentally friendly steel, Les Echos added.
Industry Minister Arnaud Montebourg, who shocked foreign investors this week by saying Arcelor's Indian CEO Lakshmi Mittal was no longer welcome in France, has said an unnamed industrialist was ready to inject 400 million euros into the site.
Montebourg huddled in a cafe with a group of orange-vested metal workers protesting near the finance ministry early on Friday, telling them that nationalisation was