PURPOSE: To make effective use of degreased and dehydrated swarf of iron and steel materials by subjecting said swarf to carburizing or hardening to embrittle the same then grinding the same and decarburizing the ground swarf and further imparting toughness and grinding the same and recycling the resulted powder to iron powder for powder metallurgy or iron powder for welding rod coating.

CONSTITUTION: Swarf of iron and steel materials is cleaned with a suitable cleaning soln. and is dried. Next, the pretreated swarf is carburized in a furnace, by using, for example, a butane gas, at 700W1,000°C, so as to have 0.6W2.0wt% carbon amounts. Next, the carburized swarf is hardened in a nonoxidative atmosphere to make martensite and embrittle the structure. The embrittled swarf is subjected to the primary grinding by mechanical means, after which it is decarburized and annealed through slow cooling by using endothermic type butane-modified gas, H2, etc. and under controlled decarburization temp. and in-furnace dew point. The resulted primary ground powder of ≤0.2wt% carbon amount is further subjected to the secondary grinding, whereby the intended iron powder is produced.