Enormous amount of scrap is generated on the shopfloor during manufacturing. Energy needed to melt increasing quantities of scrap will be ever increasing, and so will be the loss of metal during melting. Hence, conversion of scrap directly into marketable products by solid state processing methods is economical due to a lower energy requirement and a greater yield compared to the melting route. This makes the process more environmentally friendly. However, not all materials can be recycled in a solid state, with equal ease. One therefore needs to quantitatively assess the recyclability of a given kind of scrap. In the present work, a procedure to assess the recyclability of finely divided ferrous metallic scrap generated on the shopfloor is demonstrated. Recyclability includes material and the process used for recycling. For instance, a given material might be more recyclable using one process compared to the other. In the present study, the potential of powder technology (powder metallurgy (PM) and metal injection molding (MIM) based processes are compared for solid-state conversion of scrap directly into usable products. Grinding sludge collected in the shopfloor was pulverized and used as raw material. Properties of sintered parts were found to be significantly better due to in-situ reduction and densification during sintering. A quantitative measure of recyclability, namely, the Recyclability Index (RI) was defined to compare the manufacturability of different products. Recycled ferrous parts manufactured by PM route are found to have a greater RI (superior recyclability) than those manufactured by the MIM route. Complex reduction and sintering mechanisms in MIM parts, particularly, the kinetics of diffusion and volumetric shrinkage, limit suitability of MIM for recycling. In contrast, few industrial parts were developed and manufactured by conventional PM based approach to demonstrate the suitability of this novel recycling process especially for manufacture of porous parts.