So I tried it using the napalm as my fuel source ( https://www.instructables.com/id/EL4U3X42BHERIE32Y7/ ) and it actually worked. Unfortunately it really was quite weak, so I tried to increase the magnetic field and it worked much better.
I'll show how how to do it both ways.
1. Fuel (I used Napalm of course)
2. Two metal electrical boxes (Don't ask me what each one is called, just look at the pictures)
4. Can to keep the fuel in (I used a tealight candle)
6. Compass (My knife had this built into the handle, make one yourself if you don't have one: https://www.instructables.com/id/EKL14VGJOSEP287U3F/ )
7. Strong, flat rock (or an anvil if you got one)
8. Large Magnet (This is needed for the stronger magnet, I used my 6x8 speaker magnet)
9. Pliers or tongs
Look at my paint drawing to get a general idea of the setup needed. Isn't it cute?
Warning: Boxes and steel will get hot. Use care when playing with fire.
Step 1: Setup the Furnace and Let It Cook
1. Place the fuel source in the center of the larger metal box and light it. Let this burn for about 30 seconds and then quickly put the top of the furnace on top of it.
2. Postion the steel across the top of your mini furnace and let it heat for a while. (Video below)
Step 2: Making the Weaker Magnet...
1. Take the piece of steel off of the flame and, using the compass, point one end north and the other south.
2. Now hammer away while keeping the steel in that position. Hammer until the metal is cool.
Now you should have a weak permanent magnet.
Step 3: Make the Slightly Stronger Permanent Magnet
2. Setup the compass while the steel is heating. After you learn which way is north, place the large magnet there.
3. Take the steel off of the furnace and place it to the south of the large magnet. Now hammer away until the steel is cool.
Now you should have a stronger permanent magnet. Test it out (See the video below).
It's still not all that strong, but it can lift a small nail up now.
If you had a stronger magnetic field to work with, you would end up with a stronger magnet. Imagine if you had leevonk's magnet ( https://www.instructables.com/id/EY7DHMULXJERIE2Q5W/ ), then you could start making strong magnets and even sell them instead of having to buy them.