It can only be made by smelting iron ore (or ingots) and coal (or charcoal) together in a Dwarven forge, which can be crafted or found in mines. Because it uses coal, it is more costly to smelt than its Blue Mountains counterpart, Blue Dwarven steel.
Upon smelting a Dwarven steel ingot, the player earns the achievement "Dwarven Smith".
Dwarven steel is used in order to craft Dwarven equipment and armour, using normal crafting patterns on the Dwarven crafting table. Equipment made with Dwarven steel is sturdy and will not break easily, although they work slightly slower than Elven equipment.
For storage, it is also possible to craft Dwarven steel blocks.