A veteran polyester leader that started as a township enterprise in 1980 and listed in 2003 now stands at the brink of delisting. Sanfangxiang's story is not an isolated case but a microcosm of overcapacity and vicious involution in China's PET bottle chip industry.
Its 2025 annual report received a 'disclaimer of opinion' and 'negative internal control opinion', triggering dual delisting risk warnings. Meanwhile, the controlling shareholder's shares are subject to judicial auction. These signals together place *ST Sanfang at a critical crossroads.
The Price of Overcapacity
Sanfangxiang's loss trajectory closely aligns with the industry's capacity expansion cycle. From 2023 to 2025, the company suffered three consecutive years of losses totaling 1.628 billion yuan, with 2025 alone accounting for 885 million yuan—nearly double the previous year's loss.
Industry data reveals the root cause: in the PET bottle chip sector, concentrated capacity additions during 2023-2024 pushed total domestic capacity beyond 20 million tons per year, while downstream demand stood at only 12 million tons. This 8-million-ton gap continuously compressed product spreads, trapping companies in a 'higher output, no profit' paradox.
As the industry's second-largest producer, Sanfangxiang joined the capacity race. The result: higher operating rates, inventory buildup, and profit erosion—a classic prisoner's dilemma where every player tries to cut costs through scale, only to sink together.
Vulnerability of a Single-Chain Structure
More alarming is Sanfangxiang's industry chain structure. It only covers the PTA-to-PET bottle chip segment, with core raw material PX entirely purchased externally. This leaves the company with almost zero cost control capability when upstream PX prices fluctuate.
In 2025, the company's trading business revenue plummeted 59.97% year-on-year to just 1.713 billion yuan. This demonstrates that in a downward price channel, single-segment players have no bargaining power and passively bear pressure from both upstream and downstream.
By contrast, industry leaders like Hengli and Rongsheng have built full 'PX-PTA-polyester' chains, giving them stronger anti-cyclical resilience. Sanfangxiang's lesson: in the chemical industry, scale advantage in a single segment becomes a risk exposure during overcapacity.
Debt Chain and Related-Party Risks
Beyond operating losses, Sanfangxiang faces cascading guarantee defaults. As of the latest announcement, cumulative overdue debts guaranteed by the company for subsidiaries reached 522 million yuan, representing 10.82% of the most recent audited net assets.
Related-party transaction risks are equally alarming: as of end-2025, accounts receivable from related parties stood at 3.561 billion yuan, yet only 107 million yuan in bad debt provisions had been made. Auditors explicitly stated they could not obtain sufficient evidence on the recoverability of these amounts.
With controlling shareholder shares frozen, potential changes in actual control loom. This 'guarantee chain plus related-party transaction' risk transmission model is not uncommon among mid-sized chemical companies in the Jiangsu-Zhejiang region, warranting vigilance from upstream and downstream partners.
Anti-Involution Policy Shows Early Results
A turning point came in the second half of 2025, when national authorities convened a symposium with PTA and bottle chip leaders to discuss industry operations and project progress. Against the backdrop of supply-demand mismatch and thin margins, the meeting was seen as a key signal to prevent and resolve 'involution-style' competition.
Policy intervention showed effects in Q1 2026: Sanfangxiang posted a net profit of 32.7409 million yuan, reversing losses. Meanwhile, geopolitical events in the Strait of Hormuz pushed up polyester chain product prices, improving industry margins.
But it must be recognized that these improvements stem more from external factors than internal capabilities. Lianhe Credit Rating has downgraded Sanfangxiang's long-term credit rating to A- with a negative outlook. While the controlling shareholder's share auction is temporarily suspended due to execution objections, the 'sword of Damocles' remains.
Industry Lessons
Sanfangxiang's case offers three warnings for the entire polyester chain:
First, capacity expansion must match demand growth. A 20-million-ton capacity against 12-million-ton demand won't disappear because one or two players exit.
Second, chain completeness determines risk resilience. Scale advantage in a single segment becomes a burden during price downturns.
Third, related-party transactions and guarantee chains are hidden bombs. During industry downturns, these off-balance-sheet risks can accelerate corporate collapse.