I work in a machine shop. They just put signs on the scrap bins saying that steel chips and iron chips can't go in the same bin due to fire hazard.

Isn't steel just iron with carbon in it? I don't see how that could possibly be a fire hazard.
Will the carbon cause a flare up if the steel is smelted with iron?

I would not put it past management to put up a sign about a fire hazard when the real motive may have something to do with steel chips having a higher scrap value, and mixed chips selling for less.