High-purity (99%) active magnesium hydroxide is used to form insulating “glass” layer of oriented grain on silicon steel (transformer steel) surface and give special electromagnetic properties to steel. This is achieved by coating steel surface with aqueous slurry of magnesium hydroxide which reacts with silicon on steel surface during high-temperature annealing until transparent layer of magnesium silicate. Magnesium hydroxide shall have a high degree of purity and contain very low level of elements such as chlorine, bromine, calcium, fluorine and sodium which can form an unacceptably high electrical conductivity of insulating layer. Magnesium hydroxide shall also have a very small particle size to obtain slurry which is stable and has desired characteristics of coating.