A long-anticipated independent needs analysis report found “no strong strategic or business case” for such a facility in the region.
But campaigners who want a velodrome built as a legacy for Birmingham 2022 are refusing to give up the fight and are understood to have held constructive talks with British Cycling earlier this week.
Their hope is that a more detailed feasibility study can now be commissioned into the project.
Halesowen Cycling Club chairman Dave Viner, who has helped lead the campaign, said: “We are obviously very disappointed indeed the needs analysis did not support the building of a velodrome.
“We were also disappointed there was no reference in the report to the enormous amount of evidence we have compiled in recent years in favour of a velodrome.
“However, we have since been in dialogue with British Cycling and there has been an indication they are willing to explore other options, obviously once the current situation across the country improves.”
The campaign wants the study to focus on the possibility of building a low-cost velodrome in the region, similar to that used at Calshot in Hampshire.
Nearly 8,000 people have signed a petition since it emerged no facility would be built for the 2022 Games, with track cycling events instead taking place more than 100 miles away in London.
Notable supporters include three-time Tour de France winner Greg LeMond, along with Wolverhampton cycling legend Hugh Porter.
Though campaigners believe the needs analysis, produced by consultancy firm 4global on behalf of British Cycling, Birmingham City Council and Sport England, was too broad in scope, there were positives.
The report recommended exploring the possibility of covering outdoor tracks at both Halesowen and Wolverhampton’s Aldersley Stadium with a canopy to reduce the impact of bad weather.
But it claimed the investment required to build an indoor velodrome could not be justified.
The report stated: “Despite the general consensus from track cycling clubs on the need for an indoor velodrome, a number of other clubs and organisations suggested such significant capital investment could be better placed elsewhere.
“There does not appear to be a sufficiently strong strategic or business case to justify the investment in the construction of a new indoor velodrome within Birmingham.”