Can you check if you have these options enabled…
This allows the lower materials to be used for higher rank upgrades. The low materials are used at a 20:1 ratio instead of the higher materials, e.g. 20 of the lower rank scraps would get used as if it was 1 of the higher rank scraps.
If this isn’t the solution, can you post some screenshots of the materials tab of your inventory, and of the blacksmith’s screen when you’re trying to upgrade something?
Procedure for how to link the pictures…