Implementation of Steel through Grades of Iron

There have been numerous players clamoring for the addition of steel armor and weapons. I have an idea for a way to implement steel in a natural sort of way, through a system of "grades" of iron.

If a player smelts a block of iron ore, he receives an iron ingot in return - The iron ingot is "grade 0/3", the basic grade of iron. If the player then re-smelts the same iron ingot, he will get it back, but with the new tag, "grade 1/3", and if again, 2/3 and so on. Once the iron reaches Grade 3/3, it is officially Steel.

Each grade of iron could be used to make their own set of iron equipment, with higher power/defense/durability based on its grade - For instance, while normal (0/3) iron makes normal (0/3) iron armor, Grade 2/3 iron makes Grade 2/3 iron armor. On the crafting table, there would have to be a system to decide what grade of equipment is crafted, if mixed grades ingots are used.

This system would balance the manufacture of steel, without the addition of special recipes, and add an interesting dynamic into the smelting system.

Thanks for reading! Any thoughts?

P.S. Should this suggestion be in Gameplay, or Blocks, Tools, and Items?