Steel is a Tier 5 alloy of iron and carbon. As of version 1.16, it is the highest tier metal that can be created in the game, and steel equipment and items have the highest durability, mining speed, attack power and damage reduction of all craftable tools.
See also Steel making
Steel is created through a complex process of heating and refining iron ores under very high heat and pressure. Creating steel from iron requires players to have set up a pulverizer, iron anvil, forge, large quantities of fuel including charcoal, coke, or any coal and the creation and use of a new structure called a cementation furnace. This furnace is made from special material known as refractory bricks, made from fire clay, and a variety of crushed minerals, as well as requiring special iron structures and a granite or andesite stone coffin.
The steelmaking process first produces an intermediate product called blister steel. Much like iron blooms, blister steel needs to be processed manually with a hammer or through use of a helve hammer before it is ready for use.
Steel ingots can be smithed on an iron or better anvil to produce a variety of tools and equipment.