Talks aimed at saving steel production in Scunthorpe are deadlocked over who will pay for the raw materials needed to keep the blast furnaces going.

The materials need to be paid for within the next two days, according to government sources, or production will cease at the British Steel plant within weeks and cannot be restarted.

British Steel’s Chinese owner Jingye say the furnaces are “no longer financially sustainable” and they are unwilling to purchase new raw materials.

Talks are set to resume between British Steel bosses and government officials on Thursday, with unions saying the situation is on a “cliff-edge”.

The government has not ruled out nationalising British Steel, which employs 2,700 people, saying all options remain on the table.

Ministers are thought to prefer a commercial solution to secure the long-term future of the plant.

But due to the urgent need to acquire new raw materials, talks about the longer-term future of steelmaking in Scunthorpe are now largely on hold.

The immediate issue is who will pay for a shipment of iron pellets, which have been delivered but are waiting in a dock, and coke, which has been ordered and is en route to the plant.

One option being discussed is whether the government can directly buy the materials using taxpayers’ money.

But ministers have come up against legal barriers that make it tricky to intervene in such circumstances.

It is understood that the easiest legal avenue would be to come to a deal with Jingye, whereby they agree to carry on running the plant, as long as the government pays for the raw materials.

When Jingye announced last month that thousands of jobs were at risk, that triggered a consultation period that legally must last a minimum of 45 days.

Government representatives are said to be frustrated with Jingye, at what they see as an effective shutting down of British Steel, with the consultation period still ongoing.

One source involved in the negotiations, who two weeks ago was optimistic about the future relationship between Jingye and the UK government, said they could no longer foresee long-term Chinese involvement in British steelmaking.

If the government can find a way over that more immediate hurdle, then longer-term talks about British steelmaking are expected to be picked back up.

One source said the government is now likely to look for an alternative commercial partner, outside of China, to take over the steelmaking operations at Scunthorpe.

Alun Davies, national secretary in charge of steel and metals for the Community Union, said the raw materials issue was an “extreme emergency” .

“We just need them to be paid for, once that happens then there can be further discussions with the government about how we secure steel making for Scunthorpe,” he told the BBC.

Emerging from talks, Linda McCulloch from the Unite union said they would like the government to nationalise the site “to keep steelmaking alive in the UK”.

One of Scunthorpe’s blast furnaces is set to be temporarily shut down next week, in order to buy more time before the raw materials needed to keep the steelworks going run out.

The North Lincolnshire town’s skyline boasts four blast furnaces, all named after English Queens – Bess, Mary, Anne and Victoria.

Bess and Anne are currently the only two steelmaking blast furnaces operational in the UK.

Turning off a blast furnace without making it permanently unusable is notoriously difficult.

A so-called “Salamander Tap” can be used to temporarily shut down a blast furnace by drilling a hole to remove any remaining hot metal.

It is seen as a generally dangerous process, but engineers on site at Scunthorpe are now confident they can carry out the procedure.

The “Bess” blast furnace is currently scheduled to be taken temporarily out of action on 14 April.

This would leave “Anne” as the only remaining operational blast furnace in the country, but would mean raw material stockpiles last twice as long.

Reform UK is calling for British Steel to be nationalised until a buyer can be found.

The Green Party also favours nationalisation and a switch to “green” steel production.

The Conservatives and Liberal Democrats have said other options should be considered first.