Environmental Regulations and Export Tax Adjustments: The Cutting Disc Industry Faces a Critical Reshuffle — Who Will Lead the Next Chapter?

Environmental Regulations and Export Tax Adjustments: The Cutting Disc Industry Faces a Critical Reshuffle — Who Will Lead the Next Chapter?

In September 2024, a mid-sized cutting disc manufacturer in Nantong, Jiangsu, was abruptly shut down by the local Environmental Bureau due to substandard emissions. At the same time, the CFO of an export-oriented cutting disc company in Ningbo sighed over his balance sheet: “With the export tax rebate rate slashed from 13% to 9%, this order alone cost us ¥800,000 in lost profits.”

This is not an isolated case. In 2024, China's cutting disc industry found itself in the crosshairs of two simultaneous policy shifts — tightening environmental production restrictions and adjustments to export tax rebate policies. These dual pressures are triggering a deep restructuring across the supply chain, from upstream abrasives to midstream manufacturing and downstream export markets.

Dual Policy Shock: Eco-Upgrades Squeeze Production, Tax Cuts Slash Margins
1. Environmental Regulations: From Loose Oversight to Rigid Enforcement

In March 2024, the Ministry of Ecology and Environment proposed strict new standards, including:

VOC emissions capped at 30mg/m³ (previously 80mg/m³)

Dust emissions limited to 5mg/m³ (previously 15mg/m³)

Enterprises in key zones (e.g., Yangtze Delta, Pearl River Delta) must complete ultra-low emission upgrades by end of 2024

For many cutting disc manufacturers — especially resin-bond producers — this means a mandatory overhaul. “Each line retrofit costs around ¥3.5 million,” says the head of a factory in Shandong. “For plants with under 10,000 tons of capacity, that’s a death sentence.”

An industry report shows only 30% of companies have completed upgrades. The other 70% face production cuts, fines, or shutdowns.

2. Export Tax Rebates: High-End Retained, Low-End Cut

In July 2024, new rebate policies were introduced:

High-end cutting discs (superhard materials, precision-engineered): maintain 13% rebate

Low-end resin cutting discs: rebate reduced to 9%, or cancelled for high-energy models

For exporters relying on price-sensitive markets (e.g., Southeast Asia), this is devastating. “For every ton exported, we now lose ¥200 in rebate,” says a foreign trade manager. “It wipes out the cost advantage.”

Customs data shows:

Low-end cutting disc exports dropped 22% in H1 2024

High-end exports grew 15% against the trend

Supply Chain Shockwaves: Raw Materials, Factories, Buyers All Shift Gears
🔼 Upstream: Raw Material Prices Surge, Compliant Suppliers Gain Power

Environmental closures of abrasive producers (e.g., small diamond or SiC mines) led to a 20% drop in supply, pushing prices up 18% in Q3 2024. Ceramic binders — key to premium cutting discs — also surged by 15% due to energy limits.

Large manufacturers with compliant upstream contracts now hold pricing power. “We locked in bulk contracts with green-certified suppliers, saving 10%,” says a purchasing director in Jiangsu. “It’s our competitive moat.”

⚙️ Midstream: SMEs Struggle, Big Players Expand Aggressively

Mid-sized manufacturers are caught between rising costs and falling margins. One Zhejiang factory owner explains: “We spent ¥3 million upgrading equipment, and now lose ¥400k monthly in rebates. Our cash flow can’t hold much longer.”

A survey shows 70% of SMEs only have cash for 3–6 months of operations. Without upgrades by end-2024, 40% face acquisition or shutdown.

Meanwhile, leading brands like Sinoma High-Tech are scaling rapidly with new smart factories and M&A deals, acquiring struggling peers and expanding capacity by 40%.

🧩 Downstream: Buyers Prefer Green + Stable Suppliers

End customers, especially in auto parts and semiconductors, are raising their standards:

Mandatory environmental certifications

Stable supply chains with low carbon footprints

Even willingness to pay 5%+ premium for reliable sourcing

Survival Strategy: Innovation, Compliance & Market Shift
✅ Path 1: Technological Innovation

Low-VOC resins and water-based binders

Low-temp sintering + microwave drying reduces emissions by 40%

Some upgraded discs already approved by Bosch, TSMC

✅ Path 2: Shared Infrastructure

Industry alliances (e.g., Dongguan) set up shared VOC treatment centers

SME renovation cost drops by 60%

Regional funds offer low-interest loans for equipment upgrades

✅ Path 3: New Market Focus

Shift from low-end exports to domestic EV sector

Zhejiang-based factory developed cutting discs for lithium battery electrodes, securing BYD & CATL contracts

Others relocate to Vietnam to bypass rebate losses and access ASEAN trade perks

Future Outlook: From Survival to Dominance

According to industry experts, this transformation will reshape the cutting disc landscape:

Market consolidation accelerates
Top 10 brands' share expected to rise from 25% to 40% by 2025

Green becomes the new entry ticket
Low emissions and sustainability will be required for market access

High-end & customized demand soars
Precision cutting discs for semiconductors, EVs, aerospace to grow 25%+ annually

Conclusion: Not a Crisis, But a Catalyst

These changes may seem like regulatory burdens, but in reality, they mark the evolution of China’s cutting disc industry from scale-based competition to quality-driven growth.

Those who can combine eco-compliance with innovation and strategic market realignment will not only survive — they will lead the next wave of industrial excellence.

After all, the strength of China’s manufacturing lies in its ability to evolve, adapt, and rise again in the face of disruption.