Tata Steel has entered into talks with German conglomerate Thyssenkrupp over a possible joint venture to boost its ailing business.
The Indian group, which owns Jaguar Land Rover, is exploring the options for selling its loss-making UK arm which includes two factories in the Black Country.
This development is just the latest in a process stretching back to March when Tata Steel first announced it wanted to offload all or parts of its UK operations after being hit by the high costs of manufacturing and climate change policies along with cheaper foreign imports flooding the markets.
In the Black Country, Tata Steel runs a bright bar factory in Wednesbury and a coated narrow strip plant in Walsall which collectively employ around 800 people and support thousands of more jobs in the supply chain.
In a statement, it said the board had decided to look at alternative and more sustainable solutions for the European business and had entered into discussions with players in the steel industry, including engineering group Thyssenkrupp.
"Discussions have been initiated to explore the feasibility of strategic collaborations through a potential joint venture," it added.
"However, the talks are currently at a preliminary stage and there can be no certainty of a transaction as the outcome depends on consultation and negotiations with various stakeholders."
One of the biggest obstacles to the sale of the UK business has been the legacy of the British Steel Pension fund, which Tata inherited when it bought the business in 2007.
It has 130,000 members and a deficit of £700 million.
Koushik Chatterjee, Tata Steel's executive director for Europe, said: "A potential strategic combination of strip products businesses offers the best prospects to create a premium, world-class strip steel business with the scale and scope of capabilities to compete successfully on the global stage.
"It is too early to give any assurances about the success of these talks.
"Such success, especially the inclusion of the UK business in the potential joint venture, would depend on several issues including finding a suitable outcome for the British Steel Pension Scheme, successful discussions with the UK trade unions and the delivery of policy initiatives and other support from the governments of the UK and Wales."
Last week, Business Secretary Sajid Javid met with Tata Steel's management in Mumbai as part of trade mission to India to discuss future trade deals following the Brexit vote.
It came amid reports that Tata Steel had decided to put the sale process on hold for most of its UK plants, including the country's largest in Port Talbot where 4,000 staff are employed, after a decision was expected on deals during July.
Following the initial sale announcement in March, Tata Steel said it had contacted around 200 potential investors and a shortlist of buyers was subsequently drawn up for parts of the UK business including a management team called Excalibur Steel UK and Liberty House, the commodities trading firm which acquired parts of steel group Caparo last year.