A veteran chemical fiber company that started in 1980 is now fighting for survival. Sanfangxiang, a polyester leader based in Jiangyin, faces a dual delisting risk after its 2025 annual report received an 'adverse opinion' and 'internal control negative opinion,' and its controlling shareholder's shares are subject to judicial auction. Its plight is not an isolated case but a microcosm of the current overcapacity and margin compression in the polyester industry.
Overcapacity: 20 Million Tons vs 12 Million Tons Demand
Sanfangxiang's losses began in 2023, with cumulative losses over three years reaching 1.628 billion yuan, including a single-year loss of 885 million yuan in 2025. The direct driver is the supply-demand imbalance in the PET bottle chip sector. According to industry data, domestic PET bottle chip capacity surged from 2023 to 2024, exceeding 20 million tons per year, while downstream demand was only 12 million tons, leaving capacity utilization below 60%. Price spreads collapsed, trapping companies in a 'volume up, profit down' cycle.
As the second-largest player in the sector, Sanfangxiang acquired Hailun Chemical in 2020 in a 'snake-swallows-elephant' deal, shifting its core business to bottle-grade PET chips and PTA, and launched large-scale capacity expansion. Output rose, but profits were devoured by internal competition. More critically, its industrial chain covers only the PTA-to-PET chip segment, with core raw material PX entirely outsourced. Any upstream price hike squeezes margins to near zero. In 2025, the company's trading business revenue plunged 59.97% year-on-year, a stark illustration of the fragility of this single-chain model.
Debt and Internal Control: 522 Million in Guarantee Overdues and 3.561 Billion in Related-Party Receivables
Beyond operating losses, Sanfangxiang faces severe debt and internal control issues. As of the latest announcement, cumulative overdue debts from guarantees provided to subsidiaries reached 522 million yuan, accounting for 10.82% of the latest audited net assets. Hailun Petrochemical also failed to pay 25.6376 million yuan in rent due to Taiping Petrochemical Financial Leasing.
Even more concerning is the related-party transaction risk. At end-2025, the company's 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. The controlling shareholder's shares are frozen, and 600 million yuan in related-party guarantees have not been recognized as estimated liabilities. These figures collectively point to significant transparency issues. In June 2026, Lianhe Credit Rating downgraded Sanfangxiang's long-term credit rating to A- with a negative outlook.
Anti-Involution Shows Early Results: Government Intervention and Q1 2026 Turnaround
There are glimmers of hope. In the second half of 2025, national authorities convened a symposium with leading PTA and bottle chip companies to discuss industry operations and projects under construction. Against a backdrop of supply-demand mismatch and razor-thin margins, the meeting was seen as a signal to prevent and resolve 'involution-style' competition. Policy effects showed in Q1 2026: Sanfangxiang posted a net profit of 32.7409 million yuan, turning around from losses.
Additionally, the Strait of Hormuz blockade triggered a rebound in polyester chain product prices and improved margins, temporarily lifting the company's stock price above the 1-yuan delisting threshold. But the Sword of Damocles remains: the controlling shareholder's share auction has been postponed due to an objection, but the risk of control change persists; 522 million yuan in guarantee overdues and 3.561 billion yuan in related-party receivables remain unresolved.
Industry Implications: The End of Single-Link Expansion
Sanfangxiang's case sounds an alarm for the entire chemical fiber industry. In an era of widespread overcapacity, relying solely on single-link scale expansion can no longer build a moat. If the second-largest player can fall this hard, the survival space for smaller firms is even narrower. For buyers, this means reassessing supplier financial health and chain completeness to avoid supply disruptions from a single supplier's collapse. For foreign trade companies, it highlights the need to guard against performance uncertainty caused by upstream raw material price volatility and supplier financial instability.