ArcelorMittal, France target steelworks deal -sources
* Midnight deadline for accord could be extended-sources
* Deal could avoid nationalisation, save face for Hollande
* Foreign investors seen unnerved by Montebourg rhetoric
PARIS, Nov 30 (Reuters) - The French government and steelmaker ArcelorMittal are aiming to clinch a deal to save jobs and avoid a temporary nationalisation of its Florange steelworks, government sources said on Friday as a midnight deadline neared.
ArcelorMittal says the 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 Hollande said talks could stretch beyond the deadline set for an accord by ArcelorMittal, but no comment was available from the company.
"My aim is to find a long-term solution in terms of both jobs and activities for the Florange site," Hollande told reporters on a trip just 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 this week from business leaders 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 not welcome in France, has said an unnamed industrialist was ready to inject 400 million euros into the site.
Edouard Martin, head of the CFDT trade union's Florange chapter, said he hoped a new owner would come forward.
"In the long term, I don't think having Mittal in charge is an ideal scenario," he told LCI television in front of French parliament, where metal workers are protesting.
French officials have defended a temporary nationalisation of Florange, saying it is a special case because ArcelorMittal has broken its promises to keep the furnaces running.
But ArcelorMittal denies breaking commitments. Sources close to the group say Arcelor planned in 2003 - before its 2006 takeover by Mittal - to wind down inland blast furnaces in Europe, including the two in Florange, by 2010.
They argue that overcapacity in Europe's steel market, with demand 28 percent below peak 2007 levels, has made Florange's furnaces unviable and that a buyer would have to absorb deep losses to take them on, even with the rest of the site.
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