Steel is created by smelting iron ingots in a furnace. Melt down steel the same way you would any other metal, and pour in a cast to create parts. You can also add Chain armor to a Smeltery to get Molten Steel, depending on the armor used and the remaining durability.
Steel and Alumite picks are the only ones strong enough to harvest Nether ores (Cobalt and Ardite).
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