The lower the grade the faster it rusts. Forgot most people don't know that. Its rusting because there is iron in steel (duh). It's rusting quickly because it has low concentration of rust inhibitors like chromium or nickel. Increasing the concentration of these metals makes it rust slower. It also makes it harder to tool into a car body, making it a shifty choice for a car shell.

The article you linked is either uninformed or being misleading about "free iron". That just means there are no rust inhibitors so they are leaving free energy available on the surface of an iron grain at the surface of the material. This makes it rust quickly where those grains are. There are millions of these grains at the surface where the metal interfaces with air. The iron particles are in the body panel, not on top of it.