Yeah, the scrapping mod exists, and it's 100% a used exclusively as a cheese tactic to circumvent no ore portals. I'm not against the idea to be honest, but the device used would have to be so difficult to build, like requiring a level 7 Forge, that there would be no point in trying to use it to cheese the portal mechanic, or if you are using it to cheese portals, you're using it between two already well-established bases anyway which is still perfectly in-line with Iron Gate's reasoning behind Ore/Ingot portal restriction.

If I were to add it in, it would be:

Plains-level tech minimum.
Require a lot of metal on its own (30+)
Use something significantly harder to obtain than coal as fuel (Maybe a new resource refined from Tar)
Take a very long time to melt down anything (1 whole game day at least so you can only sleep cheese like a third of the timer)
Make the Return fractional, and only return materials from level 2 or higher equipment anyway, and only return metal ingots, no linen, chains, leather, etc.

Again, it has to be so irritating to use, it's literally only used to recycle upgraded gear.