The Government has reportedly rejected an appeal by Liberty Steel for £170 million in financial support.
The firm employs around 250 workers at its pipe mill in Hartlepool.
Concerns over the future of the company came after financial backer, Greensill Capital, went into administration.
Liberty says it is working with unions and employees to support the business and save jobs. The company told the Government last week that support was needed to pay operating expenses and deal with recent losses.
Chris McDonald from the Materials Processing Institute says he's convinced the government will step in to support Liberty Steel and has urged them to do it early:
A Government spokesperson said: "The Government is closely monitoring developments around Liberty Steel and continues to engage closely with the company, the broader UK steel industry and trade unions.
"Our unprecedented package of Covid support is still available to the sector to protect jobs and ensure that producers have the right support during this challenging time."
It is understood that ministers have concerns about the structure of the company and whether any bailout would have remained in the UK.
A spokesperson for Liberty's GFG Alliance said: "GFG Alliance as a whole is operationally strong and we are benefiting from strong markets in steel, aluminium and iron ore.
"While Greensill's difficulties have created a challenging situation, we have adequate funding for our current needs.
"Discussions to secure alternative long-term funding continue to make good progress and while this takes place we have asked all of our businesses to manage cash carefully.
"Combined with the efficiency drive we've implemented over the past year this has ensured that most of our major businesses generating positive cashflows.
"In the UK speciality steel business, where weakness in the aerospace market has cut demand for some products by 60%, we have been taking specific actions to stabilise the business and improve cash flow.
"Activities on the sites include reducing steel stocks, matching stock to customer orders, and working with customers to achieve terms that will bring in cash as early as possible.
"We are grateful for customers and suppliers support in this work which comes alongside our aim to secure additional working capital facilities to support the business and our use of the furlough scheme to support employees.
"We will continue to work closely with the unions and our employees to identify the most effective ways of supporting the business and preserving jobs."