The move threatened to unravel a politically charged compromise deal which France's Socialist government reached with ArcelorMittal last week, following weeks of heated talks, to try and save some 630 blast furnace jobs at the Florange plant.

Luxembourg-based ArcelorMittal said in a statement it was not abandoning the project completely but that it could not currently pursue it for technical reasons.

"(This) is perfectly coherent with what is in the agreement signed with the French government," it said.

Earlier, a European Commission spokesman confirmed it had received written notification from ArcelorMittal that the group had decided to withdraw its bid "due to technical difficulties".

The application for the ULCOS project was central to a deal in which ArcelorMittal pledged to invest 180 million euros ($235 million) in Florange and keep the site's two idled furnaces in working order so they could be restarted if it wins the project.

ULCOS (Ultra-Low Carbon dioxide Steelmaking) is a consortium of 48 European companies and other organizations working to develop ways to cut CO2 emissions from steel production.

(Reporting by Yves Clarisse; Writing by Catherine Bremer; editing by Mark John)

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