Corus will tomorrow begin mothballing its steelmaking plant at Teesside, with the eventual loss of 1600 jobs, as hopes faded of a last-minute rescue deal.

Lord Mandelson visited the plant today while business minister Pat McFadden is in India, where he will hold talks with owner Tata Steel over its future.

Several potential bidders are understood to be interested in buying the site, but talks are at an early stage and any deal is unlikely to materialise for some time.

The government is ready to facilitate any deal, but EU rules hamper how much state aid it can grant. It will take about six weeks to mothball the plant.

Corus blames the closure on a consortium led by Italian firm Marcegaglia, which, it said, had agreed to buy a majority stake in the plant but last year moved to "unilaterally and unreasonably" terminate the contract. Corus said the consortium backtracked on a commitment to buy most of the plant's steel until 2014, and without this "Offtake Framework Agreement" the plant was not viable.

This week, Middlesbrough's mayor, Ray Mallon, said he and chairman of Middlesbrough football club, Steve Gibson, had been approached by a "credible" consortium that was looking for support for its bid. "I do not want to raise false hope and there is a long way to go before any deal would be complete, but this is a deal worth investigation," he said. "Both myself and Steve Gibson will continue to do all we can to save steel jobs in the area until we are satisfied that no more can be done.

"It is now down to Tata and the government to provide all possible assistance to this consortium."

The cabinet met in Durham this afternoon. The gathering, the ninth since Gordon Brown introduced regional meetings two years ago, focused on jobs and the regional economy in the north-east and the Corus plant was expected to be high on the agenda.

Tonight, the government was accused of using these meetings as an excuse to stage party events near key marginal seats. Tory MP Douglas Carswell claimed that Labour's deputy leader, Harriet Harman, had made plans to meet activists, officials and trade unionists in the south-west when she visited the region for the cabinet's Exeter trip on 5 February.