Magnussen has scored five points from 12 races this season compared to Haas teammate Nico Hulkenberg's 22, with the 36-year-old German finishing an impressive sixth in the most recent two.
Hulkenberg will join Sauber next season and Ferrari-powered Haas look set for an all-new lineup with British rookie Oliver Bearman already signed up and Esteban Ocon looking the frontrunner to join him.
"I love Kevin...(but) what he is doing lately against Hulkenberg is not impressive to say the least," Steiner told reporters at a recent promotional event for Buffalo Trace bourbon.
"We need to be open about that... either Hulkenberg is so good that we don't know about it or Kevin is just in the moment not where he needs to be to have a seat in F1. There is this time when you need to realise...
"There's quite a few now if you look in there," added the Italian, who left Haas at the end of last year but remains a fan favourite through the Netflix docu-series Drive to Survive. "We have got Checo (Sergio Perez), Danny (Daniel Ricciardo), Kevin, (Valtteri) Bottas. Bottas is difficult to say something about because the car is not really good so we don't really know where he is.
"But there is quite a lot of these guys and the people which give them a seat need to think about this, is this the best for the team?"
Perez's form has plunged since he signed a contract extension with Red Bull in June, the 34-year-old Mexican scoring only 15 points from his last six races while triple world champion teammate Max Verstappen has won seven so far.
Former Red Bull and McLaren race winner Ricciardo, 35, has scored in only two races compared to RB teammate Yuki Tsunoda's six points finishes.
Ex-Mercedes driver Bottas, 34, is last in the standings with Sauber, a team yet to score a point this season.
Magnussen was brought back by Steiner at short notice in 2022 after the war in Ukraine forced the replacement of Russian driver Nikita Mazepin.
While he has been a consistent and loyal teammate to Hulkenberg, as well as unlucky at times, the Dane has accrued 10 penalty points and is standing on the brink of a one-race ban.
Steiner also said he had no idea whether Gene Haas might sell the team.
"I was there a long time and I still don’t know what he wants to do," he said of the American machine tool magnate. "I didn’t know last year, I didn’t know two years ago and I don’t know what he thinks short or long term."
