what is the best magnetic steel

Do you want it magnetically soft? Hard? Permeable to AC fields?

The use of a piece of steel as a magnetic pole piece means you want low-carbon steel, fully annealed (don't work the steel after annealing). There's lots of other magnetic properties for various situations, like grain-oriented silicon steel for two-dimensional AC magnetic field circuits.

I presume that you mean that you want the steel to *conduct* the magnetism, not to retain a magnetic field, or you would not need to place a magnet in it.

For that purpose -- a mild (unhardened) steel is good, and something really expensive, like Mu-metal is much better.

Hardenable steel -- if hardened and cooled with a magnetic field applied will hold it quite well. Permanent magnets used to be be made that way. These days, the exotic materials formed with powder metalurgy or ceramics are better.

Good Luck, DoN.