Europeans didn't have consistently better steel until industrial times. The best steels were from Sweden, Spain, and I believe Austria, which had relatively pure iron sources. European metallurgy certainly didn't make sense until the scientific revolution. Of course better is compared to the previous steels, Japan is still considered a leader in steels, as is Sweden.
The simple reason is again - energy source. With hotter fires you can purify your iron more, leading to less inclusions and problematic alloys. Europeans also had less efficient bellows, unlike Chinese push/pull bellows which lead to cooler fires.
This is in fact why the Chinese did not pursue laminated steels more - they had purer iron, leading to less need for laminated steels. With pure iron, they could add set amount of charcoal (carbon) to iron, creating steels of different grades. Lamination went to Japan via Korea and taken to a much higher level.
Having cruder steel is why, relatively speaking, European swords are considered more like sharp crowbars compared to Katanas.