Each crafting material can be upgraded up to godlike quality. To upgrade a material to a higher quality, you need four materials of a lower quality.
To access the combination interface, click on the Forge icon on the lower menu panel.
Next, go to the materials section of the Workshop and click Combine.
Once you have four items of the same quality, click the overlapping squares button to get a material of a higher quality.
If you have lots of materials to combine, you can click the >> button on the left to combine all the materials at once. Please note, however, that you'll only be able to combine materials this way if you have active Premium status.
In order to be able to combine materials of higher qualities, you'll need to research the relevant technologies in the Blacksmithing branch of the Academy.
The "Material saving chance" technology grants you a chance that some materials will be saved when you combine them.