For this achievement you need to smelt a block of wood using CHARCOAL to make more charcoal.
It doesn't matter which type of wood you use. First, you have to smelt wood using either coal or a wooden plank and that will give you charcoal. Then let that burn out and in the Fuel box place the charcoal you just got and a block of wood in the Ingredient box.
As soon as the wood has finished burning and you take the charcoal out, the achievement should pop.