Russian forces engaged in an all-out battle in eastern Ukraine have captured the strategic town of Lyman and surrounded a key industrial centre, Moscow has claimed.

But a Ukrainian official has denied that the city of Severodonetsk -- the focus of weeks of fierce fighting -- has been encircled, saying government troops had repelled Russian forces from its outskirts.

As the battle for Ukraine's industrial heartland raged on Saturday, French President Emmanuel Macron and German Chancellor Olaf Scholz called for "direct serious negotiations" between Russian leader Vladmir Putin and his counterpart Volodymyr Zelensky.

The EU leaders also "insisted on an immediate ceasefire and a withdrawal of Russian troops" in an 80-minute phone call with the Russian leader, the German chancellor's office said. 

Since failing in its bid to capture the capital Kyiv in the war's early stages, Russia has shifted its focus to the eastern Donbas region as it attempts to consolidate areas under its control.

"The situation is very difficult, especially in those areas in the Donbas and Kharkiv regions, where the Russian army is trying to squeeze at least some result for itself," Ukrainian President Zelensky said in his daily address to the nation.

Earlier Saturday, Russia's defence ministry said the "town of Krasny Liman has been entirely liberated from Ukrainian nationalists", using Moscow's name for Lyman.

Lyman lies on the road to Kramatorsk and Severodonetsk, which a police official in Lugansk province cited by Russian state media said was "now surrounded".

But regional governor Sergiy Gaiday told Ukrainian television "Severodonetsk has not been cut off... there is still the possibility to deliver humanitarian aid."

His remarks came as Russia, in another exercise in military muscle-flexing, said it had successfully tested hypersonic missiles in the Arctic.

- Noose tightens -
Inside Severodentsk, where an estimated 15,000 civilians remain, a local official said "constant shelling" made it increasingly difficult to get in or out.

"Evacuation is very unsafe, it's isolated cases when we manage to get people out. Now the priority is for the wounded and people who need serious medical assistance," said Oleksandr Stryuk, head of the city's military and civil administration.

The water supply was also increasingly tenuous, as a lack of electricity meant the pumps at city wells no longer functioned, he said, adding residents had gone more than two weeks without a cellphone connection. 

The sole road maintaining contact with the outside world, meanwhile, was expected to be the focus of continued Russian attacks, Lugansk governor Gaiday said Saturday night.

"Next week will be very hard, as Russia puts all its resources into seizing Severodonetsk, or cutting off the oblast from communication with Ukraine," he said.

- France, Germany urge talks -
As France and Germany called for talks aimed at ending a war that has created millions of refugees, Saturday's phone call with Putin also focused on a looming global food security crisis.

In addition to capturing key port cities such as Mariupol, Russia has used its warships to cut off others still in Ukrainian hands, blocking grain supplies from being transported out.

Russia and Ukraine supply about 30 percent of the wheat traded on global markets.

Russia has tightened its own exports and Ukraine has vast amounts stuck in storage, driving up prices and cutting availability across the globe.

Putin has repeatedly rejected any responsibility, instead blaming Western sanctions.

But on Saturday, he told Macron and Scholz that Russia was "ready" to look for ways to allow more wheat onto the global market.

"Russia is ready to help find options for the unhindered export of grain, including the export of Ukrainian grain from the Black Sea ports," the Kremlin quoted him as saying.

He also called for the lifting of sanctions to allow "an increase in the supply of Russian fertilisers and agricultural products" onto the global market.

- Putin warns on weapons -
Urgent calls by Zelensky for more advanced weaponry from Ukraine's Western allies, meanwhile, appear to paying off, with Washington agreeing to send advanced long-range rocket systems, according to US media reports.

Pentagon spokesman John Kirby did not confirm the plans to deliver the M270 Multiple Launch Rocket System, highly mobile equipment capable of firing up to 300 kilometres (186 miles) that Kyiv has said it badly needs.

But he said Washington was "still committed to helping them succeed on the battlefield".

In a phone call Saturday, British Prime Minister Boris Johnson told Zelensky his country would continue to help "provide the equipment they need", his office said.

But Putin warned Macron and Scholz that ramping up arms supplies to Ukraine would be "dangerous" and risk "further destabilisation".

He spoke after Russian forces said they had successfully fired one of their Zircon hypersonic cruise missiles some 1,000 kilometres across the Arctic.

As Zelensky seeks to ramp up international pressure on Moscow, he will speak to EU leaders at an emergency summit Monday on an embargo on Russian oil. 

Agreement on the measure is being held up by Hungary, whose Prime Minister Viktor Orban has close relations with Putin.