Steel giant ArcelorMittal SA (MT) Thursday confirmed it will invest EUR17 million in its steel mill located in Florange, France, and will resume liquid steel production at the mill in the second half of this year should the economy recover.

The company temporarily shut down both blast furnaces at Florange during the second half of 2011 in response to weaker European steel demand stemming from the onset of the European Union sovereign debt crisis. The partial plant shutdown affected around 500 of the 2,667 employees, the company said.

French President Nicolas Sarkozy has been keen to demonstrate that he is tackling unemployment and economic growth concerns. With less than two months to go to the presidential elections, and as Sarkozy continues to trail behind Socialist candidate Francois Hollande in the opinion polls, the economic outlook looks lackluster. The government forecasts only 0.5% gross domestic product growth this year after 1.7% in 2011 and reported a slight rise in unemployment to 9.4% in the fourth quarter from the third quarter.

The chief executive of the world's largest steelmaker, Lakshmi Mittal, confirmed in a statement Thursday what Sarkozy had announced earlier this morning in a radio interview.

The Luxembourg-based steelmaker, the world's largest by production, plans to invest EUR17 million at its Florange plant, EUR2 million of which will be spent on maintenance to ensure that the hot or liquid phase of steel production at the mill is ready to be re-started in the second half of the year should the economy recover, the company said.

It will also invest another EUR15 million on two new projects at Florange: EUR7 million for a new gas holder at its coke plant and EUR8 million at the finishing plant to develop new products for the automotive industry.

"ArcelorMittal is very committed to its operational presence in France," said Henri Blaffart, a senior member of the ArcelorMittal Flat Carbon Europe, a division of the steelmaker. "In the current difficult economic environment, the investments announced today clearly demonstrate that ArcelorMittal is committed to its Florange facility," he added.

The Florange plant is able to produce up to 1.4 million metric tons of crude steel annually. The plant's two blast furnaces were closed during the second half of last year but the company's other operations at the plant are still working.

ArcelorMittal told union members last week that it has decided to extend the temporary idling of its blast furnaces into the second quarter due to weak steel demand.

Steel demand in Europe dropped 1.3% in 2011. Real European steel consumption is forecast to fall 2% in 2012, marking a 16% decrease compared with the first quarter 2008.

-By Alex MacDonald and Inti Landauro, Dow Jones Newswires; +44 207 842 9328; alex.macdonald@dowjones.com (William Horobin in Paris contributed to this story.)

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