After three consecutive years of cumulative losses exceeding 1.6 billion yuan, a 'disclaimer of opinion' on its 2025 annual report, and judicial auction of controlling shareholder shares, legacy polyester leader Sanfangxiang (*ST Sanfang) teeters on the brink of delisting. Its plight, emerging from a 1980 township enterprise, is not an isolated case but a microcosm of severe overcapacity and intensifying competition in China's polyester bottle chip sector.
Root Cause: Overcapacity and a Fragile Supply Chain
Sanfangxiang's financials reveal a harsh supply-demand reality. From 2023 to 2025, losses widened to 885 million yuan in 2025, while trade revenue plummeted nearly 60%. The culprit: industry-wide overcapacity. Industry data shows that from 2023 to 2024, domestic polyester bottle chip capacity surged past 20 million tons annually, against demand of just 12 million tons—a gap of 8 million tons. Product spreads collapsed, eroding profits.
More critically, Sanfangxiang's supply chain is dangerously thin. It covers only the PTA-to-bottle chip segment, with core raw material PX heavily reliant on external purchases. When upstream PX prices rise, cost pressure directly hits margins, leaving little buffer. This single-link, asset-heavy model proves fragile in a buyer's market.
Debt and Guarantees: A Sword of Damocles
Beyond operating losses, Sanfangxiang faces severe debt risks. As of the latest filing, overdue debts guaranteed by the company for subsidiaries reached 522 million yuan, or 10.82% of audited net assets. A 290 million yuan finance lease for subsidiary Hailun Petrochemical has fallen into arrears, forcing the company to seek extensions.
More alarming are related-party transaction risks. At end-2025, accounts receivable from related parties totaled 3.561 billion yuan, with only 107 million yuan in bad debt provisions. Auditors stated they could not obtain sufficient evidence for recoverability. Additionally, controlling shareholder shares are frozen, risking a change in control. These uncertainties prompted Lianhe Credit Rating to downgrade the company's rating to A- with a negative outlook.
Industry Turning Point: Can Anti-Competition Policies Bring Relief?
The root of Sanfangxiang's crisis is 'involution,' and government anti-competition measures may offer a lifeline. In late 2025, national authorities convened a meeting of PTA and bottle chip leaders to discuss industry operations and project progress. Amid severe supply-demand mismatch and thin margins, the meeting was seen as a key step to prevent 'involutionary' competition and stabilize the sector.
Preliminary effects appeared in Q1 2026, with Sanfangxiang posting a net profit of 32.74 million yuan, reversing losses. Coupled with price rebounds in the polyester chain due to geopolitical events in the Strait of Hormuz, the stock temporarily escaped the 1 yuan delisting threshold. However, the threat remains. The share auction was postponed due to objections, but the 'sword' still hangs overhead.
Lessons for Industrial Clusters: Survival Rules in Polyester
Sanfangxiang's case, based in Jiangyin—a key chemical fiber cluster—offers stark lessons:
- Scale expansion alone is unsustainable. In an oversupplied market, adding capacity worsens imbalances and compresses margins. Companies must pivot to differentiation, such as high-value, functional polyester products.
- Vertical integration is key to risk resistance. Sanfangxiang's weak cost control stems from its single-link coverage. Players with full PX-PTA-polyester chains are more resilient to raw material volatility.
- Financial prudence trumps short-term expansion. The guarantee defaults and related-party risks highlight the need to control guarantee exposure and strengthen receivables management.