On top of their lower labour costs, the mini-mills' electric-arc furnaces are much cheaper to build than iron-ore blast furnaces.

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The move provoked an angry reaction from the French government, which accused Arcelor Mittal of breaking a 2006 commitment to keep the blast furnaces running - a claim denied by the steel giant - and criticised the firm for refusing to sell off the site as a whole.

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In 2006 the steelmaker embarked on a massive investment and construction project to build blast furnaces to produce high-quality virgin steel for cars, ships and consumer durable goods for parent Hyundai Motor and other customers.

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And as Jonathan Allum, a Japan strategist at KBC Financial Products, points out, it makes no sense for China to build much of this stuff since its competitive advantage is cheap labour, not cheap-to-run, depreciated blast furnaces like those in Japan.

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The talks come ahead of a deadline on Saturday which Mr Mittal gave the state to find a buyer for the two idled blast furnaces in Florange, a traditional steel town in north-eastern France.

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But in 2006, it embarked on a massive investment and construction project to build blast furnaces which use iron ore and coking coal to produce high-quality virgin steel for cars, ships and consumer durable goods.

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