French owner Eurenco says it will close the Vihtavuori smokeless powder plant in Laukaa, north of Jyväskylä, within five weeks unless it finds a buyer for it.
Eurenco has offered the factory to the state-owned defence manufacturer Patria, which said it is not interested. Patria sold its last 20 percent ownership in Vihtavuori in 2010.
On Monday evening, employees at the facility began a 24-hour strike to protest the announcement. The facility has just over 100 employees.
Staff representatives met with government officials in Helsinki on Tuesday, demanding that the state do everything in its power to rescue the plant.
MoD: "No Plan B"
"From the ministry's point of view, it is very important that powder manufacturing continue in Finland," the Defence Ministry's State Secretary Marcus Rantala told Yle.
Domestic powder production is listed in the latest defence policy white paper among the matters that must be guaranteed as a precautionary measure regarding any future crisis or conflict.
"We're assuming that we can find a workable model for powder production in Finland," he said. "There is no Plan B."
Labour Minister Lauri Ihalainen also promised that the government will do all it can to preserve the factory. However he pointed out that the Finnish Defence Forces' needs are not enough to maintain such a large plant.
Originally state-owned, the plant dates back to 1926. In 1966, four people were killed by an explosion at the factory, and one died in 2002.
Last May, an explosive fire at the Vihtavuori injured two employees, one of them seriously. A few weeks later the company said it was considering the sale of the plant due to declining sales of propellants.
Vihtavuori smokeless powder is widely distributed in the United States and elsewhere. Eurenco also has plants in France, Belgium and Sweden.