It's not a mistake. Spelling a word incorrectly is a mistake. Making it so that charcoal + iron /= steel isn't a mistake.
Besides, I was just reading up on Iron and Steel. Just for fun, it's not as simple as charcoal + iron = steel anyway. Pure iron is almost useless as a metal, because it's very soft. Since ancient times, even cast iron and wrought iron have been full of carbon.
Cast iron actually has more carbon in it than Steel does. Mixing charcoal with iron doesn't make steel. Steel is made by a very specific process that fixes the carbon to the iron in a certain way. Not only that, but it's a highly specific range of carbon that makes for good steel.
So the "iron" in the game would have more carbon in it than the steel does. "Adding charcoal" isn't going to make steel.
So your premise doesn't even hold up anyway, never mind the fact that I disagree they were aiming for realism in the first place.