The presence of δ-ferrite in 316L stainless steel powder reused several times contributes to structural defect formation in selective laser melted parts built using the pin support structure. The virgin 316L stainless steel powder is fully austenitic. After several powder reuse cycles, reused powder has a finer particle size and about 6 vol. % of δ-ferrite. Phase change occurs due to the thermal cycles imposed on the particles near the melt pool, via spattering and further interaction of in-flight droplets with the laser beam. Phase transformation changes the magnetic behavior of the powder leading to particle clustering in the powder bed. The uniformity of the powder bed is affected causing defects such as porosity, delamination, warping and lack of fusion. These defects are more prone to occur at the beginning of the building process. The magnetic and non-magnetic fractions of the reused powder were separated from each other using magnetic separation. Powder characterization was performed using scanning electron microscopy, laser scattering particle size analysis, X-ray diffraction, and magnetization measurements. An explanation for the formation of such defects based on the magnetic behavior of δ-ferrite powder particles is proposed. The results suggest that magnetic separation should be used to remove magnetic particles after several reuse cycles.