Commerce Secretary Malcolm Baldrige began 11th-hour talks yesterday with executives of the nation's largest steel companies in an attempt to settle a bitter dispute over steel imports that is expected to come to a head tomorrow, sources said.

Baldrige, Commerce Undersecretary Lionel Olmer and the U.S. Trade Representative's general counsel, Donald deKieffer, yesterday intensified the eight-month-old discussions with steel leaders, hoping to head off a confrontation. The domestic industry has accused European countries of unfairly subsidizing their steel imports to markets here.

Commerce is expected to find all or most of the nine largely European countries named in complaints guilty of selling the subsidized steel when the department makes its preliminary subsidy determinations by 11:59 p.m. on Thursday, sources said. Such a ruling would levy a heavy price on the Europeans, suffering from dramatic unemployment, requiring them to pay a bond equal to the amount of the subsidy.

That would make steel importers reluctant to buy European steel because of the added duty, exacerbating the European unemployment problem. It could also lead to retaliation by Europe against American agricultural, textile, chemical or other products sold overseas.

Baldrige is empowered by law to attempt to reach a settlement, and sources said he may ask the steel industry to accept an arrangement similar to that offered by the Japanese in the case of automobile imports. In that instance, the Japanese automobile manufacturers agreed to restrain "voluntarily" their shipments of cars here.

However, sources also cautioned that any settlement before the Thursday deadline is unlikely, particularly because a settlement mechanism such as quotas could be too complicated to manage. In addition, the Europeans in the past have vowed to adhere to special arrangements but then have violated those settlements, industry sources said.

Officials at the Commerce Department, the U.S. Trade Representative's Office and within the nation's largest steel companies declined to confirm the meeting. But sources said the government and industry representatives began meeting at 5 p.m. yesterday in New York City and could continue up until the deadline. The European Economic Community was not represented at the meetings and had not made an offer to settle the cases, an EEC spokesman said.

The steel issue already has created tensions between Europe and the United States. The U.S. industry complaints were filed after high levels of market penetration by foreign steel makers last year. Steel imports were historically high in January, but have declined in the past few months.

The countries involved are Belgium, West Germany, France, Italy, Luxembourg, the Netherlands, the United Kingdom, Brazil and South Africa.