Overcapacity Backlash: A Veteran Polyester Giant's Delisting Crisis and Industry Warning

The polyester bottle-grade chip industry has seen a tidal wave of new capacity over the past two years, with domestic total capacity exceeding 20 million tons per year against downstream demand of only about 12 million tons. This supply-demand gap of nearly 8 million tons means more than one-third of capacity is idle or underutilized, collapsing product spreads and pushing Sanfangxiang, the second-largest producer, to the brink of delisting.\n\n## Capacity Overcapacity: From Profit Peak to Three Years of Losses\n\nSanfangxiang's turning point came in 2020 when the Jiangyin-based veteran chemical fiber firm acquired Hailun Chemical in a 7.35 billion yuan 'snake-swallows-elephant' deal, shifting its main business from textile dyeing to PTA and bottle-grade chips. In the first two years post-acquisition, profits rose from 630 million yuan to 818 million yuan, appearing successful. But from 2023, the consequences of concentrated capacity release began to show.\n\nFrom 2023 to 2025, the company suffered three consecutive years of losses totaling 1.628 billion yuan, with a single-year loss of 885 million yuan in 2025, nearly doubling year-on-year. Meanwhile, trading revenue plunged 59.97% to 1.713 billion yuan. The profit evaporation directly mirrors the persistent narrowing of PTA-bottle chip spreads—when the entire industry expands, cost control becomes a matter of life and death.\n\nSanfangxiang's fatal weakness lies in its overly narrow supply chain. It only covers the PTA-to-bottle chip segment, relying entirely on external purchases for the key raw material PX. Once upstream PX prices rise, margins are instantly squeezed—a stark contrast to integrated polyester leaders with self-supplied PX from refinery complexes.\n\n## Debt Chain Reaction: Guarantee Defaults and Audit Alarms\n\nLosses are just the surface; debt risks are the real sword hanging overhead. As of the latest filing, cumulative overdue guarantees provided by Sanfangxiang for subsidiaries reached 522 million yuan, accounting for 10.82% of net assets. A single 290 million yuan financing lease for Hailun Chemical triggered guarantee obligations due to missed rent payments.\n\nMore alarming is the related-party receivable issue. At end-2025, the company's receivables from related parties stood at 3.561 billion yuan, but accumulated bad debt provisions were only 107 million yuan. Auditors stated they could not obtain sufficient evidence for the recoverability of these amounts, leading directly to a 'disclaimer of opinion' on the annual report. The controlling shareholder's shares have been frozen by judicial order, and if subsequently auctioned, the company's actual control could change hands.\n\n## Government Intervention: A Turnaround and Unresolved Risks\n\nExcessive industry 'involution' finally drew policy attention. In the second half of 2025, relevant national authorities convened a symposium with major PTA and bottle chip producers to coordinate on ongoing projects and industry operations. The meeting was widely seen as a signal to prevent vicious competition.\n\nResults began to show in Q1 2026: Sanfangxiang posted a net profit of 32.74 million yuan, turning around from losses. Coupled with geopolitical events in the Strait of Hormuz that pushed up polyester chain product prices, the company's margins improved and its stock price temporarily moved away from the 1 yuan delisting threshold.\n\nBut risks are far from resolved. In June 2026, Lianhe Credit Rating downgraded Sanfangxiang's long-term credit rating to A- with a negative outlook. The controlling shareholder's share auction has been postponed due to an objection, but remains pending. A 600 million yuan related-party guarantee for the controlling shareholder still lacks a recognized estimated liability—a hidden debt bomb that could detonate at any time.\n\n## Practical Advice\n\n### For Buyers\n- Evaluate supplier supply chain completeness: Prioritize companies with integrated PX-PTA-bottle chip capacity, which are more resilient to raw material price volatility.\n- Monitor supplier guarantee and receivable risks: Include 'financial health clauses' in procurement contracts, allowing shorter payment terms or prepayment if the supplier receives a non-standard audit opinion or has guarantee defaults.\n- Diversify sourcing: Avoid concentrating bottle chip orders on a single supplier, especially those facing delisting risk, to prevent supply disruptions.\n\n### For Exporters\n- Use futures to lock in spreads: In periods of high PTA-bottle chip spread volatility, hedge raw material cost risks using Zhengzhou Commodity Exchange PTA futures or options.\n- Monitor geopolitical impact on exports: Key shipping lanes like the Strait of Hormuz can temporarily boost product prices but also disrupt delivery schedules; negotiate price adjustment clauses with customers in advance.\n- Establish supplier financial early-warning systems: Regularly track upstream polyester firms' annual report audit opinions, guarantee defaults, and credit rating changes as input for contract renewal decisions.