There are a variety of ways that powdered metals (the raw material for PM parts) are produced, but the predominate method is atomization. A good explanation of the atomization process can be found in Powdered Metallurgy Review Magazine:
“Atomisation involves the disintegration of a thin stream of molten metal through the impingement of high energy jets of a fluid (liquid or gas). Water is the most commonly used liquid in atomisation.
Water atomised iron powders also have irregular particle shape and therefore good green strength. Unlike sponge iron, the individual powder particles do not contain internal porosity and, because of extensive development of the annealing process, have superior compressibility (see section on Forming processes). Water atomised powders are therefore the material of choice where high green density is sought in PM structural parts.”
For more information on the production of powdered metals please see:
http://www.pm-review.com/introduction-to-powder-metallurgy/powder-production-technologies/