That is sadly scrap iron in marleybone; He is looking for "steel" which Is usually found in Khrysalis from what I'm aware at least that's where its more abundant. Farming wise I don't know... However try Khrysalis.
*There are quite a few Celestia bosses on that list, including Bristleclaw in the Floating Land of Celestia who drops both Steel and Brass.
*In Zafaria, the Blackback (gorilla) soldiers, Gorilla Spider witches and all the Savannah Fire Lions drop Steel.
*The Death Seraphs in Avalon drop Steel, plus the Bog Witch and the Black Knight.
Definitely Steel is recorded as dropping in all the worlds from Celestia on up. But I can't find any sign that it drops in the first arc worlds - no one has updated the wiki with that information.
You can also get it from fishing chests in the Life house, Storm house, Polarian Shipwreck house, and the Sun Palace house. And from Star Jewel blossoms that come as rare drops from Farley's gardening pack.