Tata Steel said late last night that it had halted the sale of its biggest UK assets as it entered talks with German rival Thyssenkrupp.
The announcement came after business secretary Sajid Javid flew to Mumbai ahead of a Tata board meeting which took place yesterday.
The discussions regarding a joint venture are at an early stage, Tata added. Their success will depend on a number of factors, namely finding a suitable outcome for the burdensome pension fund which has a deficit of £700m.
The Indian conglomerate believes linking up the two steel giants' strip products operations is most likely to create a business which can compete in an increasingly tough international market.
It decided to look at an alternative after weighing up the seven expressions of interest received for the UK business, as well as the impact of the Brexit vote and the British Steel pension fund.
Gareth Stace, director of UK Steel, said: "It's positive that discussions aren't at the end of the road, but they've certainly changed direction."
"For the staff affected, their communities and for the rest of us in the industry we need more certainty, but the hope lives on that a long-term, sustainable solution can be found that secures the future for these plants."