Smelting Blue Dwarven Steel earns the achievement "Blue Mountains Smith".
Because Luigon is a lot more common and easier to obtain than coal, Blue Dwarven steel is much easier to make than ordinary Dwarven steel. Assuming, of course, you're in the Blue Mountains, which are much closer to the Shire than the Iron Hills. Because of the abundance of Luigon, Blue Dwarven steel is easier to make than its Eastern Counterpart. However, Blue Dwarven equipment has 50 less durability.
Blue Dwarven steel is used to make armour and equipment, which, aside from durability, are identical in every aspect to those made from Dwarven steel from the Dwarves of the Iron Hills, albeit significantly cheaper.
Blue Dwarven steel can also be stored as a block.