It almost certainly isn't going to Apple directly for disposal. It's going to a recycler. I suppose it is possible that Apple would have their manufacturing partners buy recycled titanium from the recycler to use in Apple products; but this isn't "Apple melts it down and uses it in an Apple-run factory" since those don't exist.
Personally, I'm keeping my old card to use as a scraper. I ran it through a degausser to wipe the magnetic stripe, and used a dremel grinding wheel to destroy the EMV chip/contacts. Since the card contains no printed number, it's now just a chunk of titanium with no way to read the (expired anyway) credit card data off it.
One thing I find humorous is the giant package Apple sent the replacement+send-back-envelope in. I'm pretty sure that completely defeats the "environmental savings" of sending it back for recycling compared to just shipping a new card in a standard paper envelope like every other credit card.