It is only pure iron that affect Demeleier's fae, which is definitely not a wholly traditional approach as you've noted—in certain folklore and stories (including, it seems, Pokemon), steel's status as an iron alloy is also enough to deter the fae. We don't handle it this way in Demeleier because we don't want to ban such a wide swath of canon character weaponry.

So, in the case of Steel-type Pokemon, we would treat them the same way we treat any gear/equipment of a dubious metal. If it can be asserted by the apping player that their chosen Pokemon are lacking in pure iron content, they're allowed to bring them in. But if they canonically do have iron, or the player can't envision them in any other way, they will not be allowed.