Worthy of our steel

[Xinfu]

“WE'RE AT CLOSE grips at last,” said Holmes, as we walked together across the moor. “What a nerve the fellow has! How he pulled himself together in the face of what must have been a paralyzing shock when he found that the wrong man had fallen a victim to his plot. I told you in London, Watson, and I tell you now again, that we have never had a foeman more worthy of our steel.” =========================
My interpretations:

1.He is the most difficult enemy we have ever faced.
2.He is the enemy that is the most worth dealing with.

[ricardo1949]

I would suggest:

We have never had an enemy more worthy of the punishment that we are going to give him.

[Rusty]

I believe that to be 'worthy of someone's steel' means that the speaker considers the other person to be a worthy challenge.
So, saying that he is 'worth dealing with' is a good interpretation.

[Xinfu]

Thank you~