In Swedish folklore, carrying something made of steel – a knife, a pair of scissors, or anything really – is said to ward off various dark forces, anything from trolls to witches. Where does this belief originate, and where (in folklore in which regions) does it apply? Who's afraid of steel? And does it have to be shining steel, or does a wrought iron object (like a horseshoe) work as well? If not, what is special about steel?
All the sources I've looked at do indeed say that iron repels fairies, and horseshoes, nails and shears have all been used to keep travellers and the newborn safe.
There are many theories as to why this might be so, but my own opinion is that iron is a human artifact, so it would be "culture" as opposed to "nature". It's also another form of magic, since smiths and smithys were seen as magical places in former times. (In the Fairy-Faith in Celtic Countries, Evan-Wentz suggests that the Fairies were former inhabitiants of Britian and Ireland who were unable to make iron and therefore feared it. He does note that the iron taboo is very common.)
As for steel, it's an improved form of iron, so you would expect it to be better all round. TV Tropes has an interesting post on Cold Iron - and they suggest that the ferromagnetic properties of iron may be what made fairies fear it.