<p>Large steel chips (SCs), a common by-product of machining, are usually recycled through energy-intensive processes such as melting and casting, which offer limited environmental sustainability. An alternative is ball milling, which converts SCs into powders for additive manufacturing (AM) and powder metallurgy (PM), though this approach remains inefficient. In contrast, steel grinding chips (SGCs) are often overlooked but hold significant promise. Their near-spherical morphology makes them inherently suitable for direct use in AM and PM with minimal pre-processing. This review explores sustainable recycling strategies for both SCs and SGCs, emphasizing their potential as feedstock materials. Research indicates that SGCs exhibit properties comparable to those of conventional metal powders; however, further studies are required to characterize their morphology, rheology, and sinterability fully. Compared to traditional melting, direct recycling through AM and PM offers clear advantages by reducing energy demand, emissions, and dependence on virgin ores. Despite these benefits, widespread industrial adoption remains limited due to the lack of standardized recycling policies. Interestingly, India has emerged as a leader in SCs and SGCs recycling research, contributing significantly to advancements in metal matrix composites, coatings, and AM components derived from machining waste. By consolidating current knowledge, this review highlights the environmental and economic advantages of direct chip recycling while identifying gaps in processing optimization and policy frameworks. Advancing these methods could transform sustainable manufacturing, aligning with circular economy principles by minimizing waste and maximizing resource efficiency.</p> Graphic Abstract <p></p>