The British steelworks, owned by China's Jingye Group, wants to replace its aging blast furnace with two electric arc furnaces (EAFs) - one in Scunthorpe and one in Teesside.
Construction is expected to take two to three years .
British Steel has said it aims to transform the firm into a "green and sustainable company" and has had to look at various scenarios to help it achieve this.
Trade unions say the shift will could ultimately lead to the loss of between 1,500 and 2,000 jobs, predominantly in Scunthorpe.
Government sources say the proposals are part of a plan that includes a taxpayer support package of up to £500 million for British Steel , reflecting the package agreed for rival Tata.
BBC sources in London said the smelters are not profitable - they are losing £1m a day, according to the government - are not "green" and are therefore , are unsustainable from a financial and environmental point of view.
It was previously reported that the main competitor of British Steel, the Indian Tata Steel, is also has plans to stop metallurgical productionin the UK, proposing to replace domestic production with billets from India.
