Runes can be found doing the Countess Farming in Act 1, Black Marsh, Forgotten Tower.
Steel can be used in the following equipment: In order to create Steel you need to socket these Runes in the following order: Runewords convert Armor or Weapons in Unique Equipment once the required amount of Runes is placed in the correct order, granting said item a fixed set of properties. Steel can be applied to Axes, Maces and Swords and is composed of 2 Runes.