Armed men in the harbour of Kismayo have been holding 48 fishermen and their three fishing vessels since 15 August and have demanded $500,000 for each of the boats and their crew, Taiwan's Ministry of Foreign Affairs said.
Taiwan had asked for international help in contacting the kidnappers, and talked to them last week in an effort to negotiate a lower ransom.
The Liberty Times newspaper quoted unidentified negotiators as saying Somali soldiers had been deployed near Kismayo to prepare for an attack on the captors. UN troops are to be sent in as backup, the report said.
But the hostage-takers, reported to be anti-government rebels, were moving rockets, machine guns and other weapons on board the fishing vessels to prepare for an attack, it said. More than 20 armed men were standing guard over the hostages, it said.
"The situation has been grim as the rebels were planning to use the crew as human shields," the newspaper reported.
"The situation has been grim as the rebels were planning to use the crew as human shields"
Michel Lu, spokesman,
Taiwan Foreign Ministry
Taiwan Foreign Ministry spokesman Michel Lu declined to comment on the report, but said some progress had been made in negotiating with the rebels.
The Somali rebels threatened on Friday to start killing one hostage a day if the ransom was not paid within 48 hours, but so far the crew members have not been harmed, the ministry said.
The hostages include three Taiwanese captains and 45 crew members from Indonesia, China, the Philippines and Vietnam.
Meanwhile, a Taiwanese fishermen's representative urged rival China to help negotiate the hostages' release, noting that there were 14 Chinese fishermen on the boats seized.
The Taiwanese boat owners pay an annual fee for fishing rights in the area, and China could help because it has diplomatic ties with Somalia, said Chang Hsing-wu, head of the Fishermen Association in southern Kaohsiung city.
Taiwan and China split amid civil war in 1949, and China claims Taiwan as part of the Chinese territory.
Piracy along the Somalian coast is common. Several ships a month are attacked or hijacked, with valuables stolen and crews held for ransom. A ship carrying international food aid has been held by rebels since late June.