A veteran polyester company founded in 1980 now stands on the brink of delisting. Sanfangxiang's plight is not an isolated incident but a microcosm of the severe overcapacity and intensifying involution in China's polyester industry. When the second-largest player in the sector suffers consecutive losses, and when the government must intervene to regulate, the underlying logic of this trillion-yuan industry is being rewritten.
The Price of Overcapacity
The data is alarming. From 2023 to 2024, domestic PET bottle chip capacity surged, exceeding 20 million tons per year, while downstream demand was only about 12 million tons. This supply-demand gap of 8 million tons directly compressed product spreads. As the industry's second-largest producer, Sanfangxiang posted losses for three consecutive years, totaling 1.628 billion yuan, with a loss of 885 million yuan in 2025 alone, nearly doubling year-on-year.
This is not an isolated operational failure. The entire polyester chain, from PTA to bottle chips, is caught in a 'volume-up, profit-down' spiral. PTA capacity also peaked in recent years, drawing major players into a race that tied profitability closely to PTA's cyclical swings. Sanfangxiang's chain covers only the PTA-to-bottle-chip segment, leaving it fully exposed to purchased PX—its cost flexibility is virtually zero.
Structural Risks Converge
Debt issues compound the crisis. As of the latest filing, cumulative overdue guarantees for subsidiaries reached 522 million yuan, or 10.82% of net assets. Related-party receivables stood at 3.561 billion yuan, with only 107 million yuan in provisions—auditors could not verify recoverability. Controlling shareholder shares are frozen, and a change in control is possible.
More critically, the 2025 annual report received a 'disclaimer of opinion' and an 'adverse internal control opinion,' triggering a dual delisting risk warning. For a company listed for 23 years, this 'credit bankruptcy' is more fatal than the losses themselves.
Anti-Involution Policy Shows Early Effect
A turning point came from policy. In late 2025, national authorities convened a symposium with major PTA and bottle chip producers, focusing on preventing 'involution-style competition.' Given the severe mismatch, administrative intervention is seen as key to correcting the industry. In Q1 2026, Sanfangxiang posted a net profit of 32.74 million yuan, returning to profitability. The Strait of Hormuz blockade also boosted polyester product prices, offering short-term relief.
But policy can only ease symptoms, not cure the disease. Market forces must drive capacity consolidation. Companies with narrow chains and weak cost control remain vulnerable. Sanfangxiang's stock has rebounded past the 1-yuan delisting threshold, but Lianhe Ratings downgraded its credit to A- with a negative outlook.
Survival Rules in Industry Shakeout
Sanfangxiang's case is a wake-up call: the era of crude capacity expansion is over. Future competition will hinge on three dimensions:
- Vertical integration from raw materials to end products for cost closure
- Product differentiation to avoid commodity-style price wars
- Financial resilience, with low leverage and high cash flow as cyclical defenses
For buyers and exporters, this event demands upgraded supplier screening criteria.
For Buyers - Assess suppliers' chain completeness, prioritizing those with PX-PTA-bottle chip integration - Monitor audit opinions and guarantee balances; avoid firms with irregular financials - Use price hedging mechanisms for bottle chip procurement, blending long-term contracts with spot buys
For Exporters - Build dynamic credit evaluation systems for suppliers, regularly checking debt and guarantee data - Maintain a backup supplier list for oversupplied categories to prevent sudden disruptions - Track anti-involution policy shifts; seek M&A-driven partnership opportunities during industry consolidation
The polyester industry is undergoing a deep shakeout. Sanfangxiang's crossroads is the industry's turning point. Only those that restructure through the pain will survive to ride the next cycle.