Steel works only in maces like mace, morning star or flair. Hammers fall under the sub-category of maces so they will not work for runewords which require a mace.
From Arreat Summit:
Required Item Types for Formulae
Make sure you read this so you’ll use the right items. People especially have problems with Maces.
Body Armor = Any armor that is worn on your chest and not any type of other armor such as boots, helms, gloves, etc.
Helms = Any armor that is worn on the head, including helms, Barbarian Helms, Druid Pelts, and Circlets.
Shield = Any armor that can be used to block, including shields, Necromancer Shrunken Heads, and Paladin Shields.
Clubs = Club, Spiked Club, and Exceptional/Elite versions.
Hammers = War Hammer, Maul, Great Maul, and Exceptional/Elite versions. These will not work in mace recipes even though they are listed on the mace page.
Maces = Mace, Morning Star, Flail, and Exceptional/Elite versions. This does not include any other types of Maces. Make sure you read about Hammers above. They are not “maces” in the case of Runewords.
Melee Weapons = Most weapons that aren’t ranged such as a Sword or Hammer. A Bow or Crossbow is a ranged weapon and is not in this category. Sorceress Orbs are not considered Melee Weapons. Melee Weapons: Hand-to-Hand, Blunt, Combo Weapon, Polearm, Spear, Knife, Sword, Axe.
Missile Weapons = Bows and Crossbows.
Weapons = Melee Weapons, Missile Weapons, Orbs.
Scepters = Scepter, Grand Scepter, War Scepter, and Exceptional/Elite versions.
Staves - Mean Staves and not other items that are Staff class weapons like Wands.
http://classic.battle.net/diablo2exp/items/runewords.shtml