This is a woven/fluffed mineral fibre insulation for containing heat. It's just like domestic loft insulation, but much less scratchy and irritant. It feels nice and soft like cotton wool, BUT it can stand absurd loads of heat without even discolouring. It is used in kilns and fireplaces to contain heat and, well, it's awesome!
Here is the newly insulated furnace looking like a lovely Christmas scene...
I recently cobbled together this furnace to heat steel for blacksmithing, It worked. Essentially it is a small metal box with lots of insulation, in which charcoal can be burnt to create a very high heat.
It used to have marble insulation with some horticultural vermiculite (because that was all I had).
I made the furnace to get a better heat. Previously I have done this on an open barbecue as a forge. That also works, but it is very inefficient and uses a lot of fuel.
Lovely ceramic woolYou can get this online from kiln and fireplace specialist suppliers. It is not especially expensive.
First step was to measure the existing furnace box.