There is a plastic washer between them. Nylon, I think. So there is a plastic thrust bearing on each end. 'Not the best bearings in the world, but then the spout only rotates about 90 degrees, at a fraction of an RPM, and only a hew times a day.Steel anything in a water system sounds like rust to me.
Do I understand correctly? The red part is stationary in service and the blue part rotates around it?
If that is correct, why is there no plastic washer (or other thrust bearing) between the blue and black parts?
Steel embedded epoxy (like JB Weld) doesn't rust, because the steel is well embedded in the epoxy matrix. In any case. no water reaches the lower block, unless the faucet is leaking due to an O-Ring failure. In that case, the faucet would be repaired.