No steel should not be used for transformer cores. Either silicon steel (special kind of steel that can be used in transformers cores) or just iron. There is some info: +https://www.quora.com/What-happens-if-a-transformer-core-is-made-of-steel-instead-of-iron
Basically steel has more hysterisis and therefore is not suitable for use in a transformer, but can be used to make permanent magnets. In a transformer you want something that will magnetize and demagnetize easily when you stop applying current.