The problem was a combination of case material, the stepped chamber of the design, and also the lacquer coating used during WW2.
The German army knew very well that Lugers would experience feeding and extracting problems when used with steel cased ammunition and they placed warning labels on the ammunition crates.
Mauser was asked to develop a fix for this, which they actually presented to the army, but it was never used in large amounts: A reamer that would effectively remove the chamber step from the chamber, thus eliminating the main cause of the steel case jams.
IMHO collectors still don't check their chambers enough
The stepped chamber is one of the things that Mauser did not include in their post-war Parabellum design. So these should work well with steel cased ammunition, theoretically.