I suspect it is capilliary action (as Torbjorn suspects in the video), with the copper being drawn up between the steel and the mill scale. Pretty cool effect though.
I've done welding and some minor smithing. If it is possible to put a ring of copper inside like that, and it alloy with the metal then that just opens up some possibilities. I suppose that heating up the metals allowed the copper to integrate, it is just new to me that it's possible, it's making me think about it. I'm going to find out. This gave me something to think about. Thanks.
I think he's effectively soldering the steel together with copper rather than a more traditional tin/silver/lead composition using the borax as a flux. The heat of the furnace would be well above the melting point of copper, but bellow that of steel.
You can forge a mix of copper and steel, it is sometimes seen in Damascus knives or Mokume-gane etc and mainly used for decorative effect. Probably tricky to get right and I don't think it would do any favors for the final strength of the piece, I haven't tried it myself (being a rank amateur smith at best).
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