In the first quarter of 2026, Sanfangxiang (*ST Sanfang), the second-largest polyester bottle chip producer in China, reported a net profit of 32.74 million yuan, turning profitable year-on-year. However, this short-term recovery hardly masks the harsh reality of cumulative losses of 1.628 billion yuan over the past three years, and a 'disclaimer of opinion' on its 2025 annual report that triggered dual delisting risk warnings. From a township textile factory founded in 1980 in Jiangyin to an A-share listed veteran, Sanfangxiang's predicament is not an isolated case—it is a typical snapshot of the bursting capacity bubble in China's polyester bottle chip industry.
Overcapacity: The 20 Million vs. 12 Million Ton Imbalance
Industry public data shows that between 2023 and 2024, domestic polyester bottle chip capacity exploded, exceeding 20 million tons per year, while market demand stood at only 12 million tons per year. The supply-demand gap of 8 million tons means over one-third of capacity was idle or operating at low efficiency. Sanfangxiang entered this 'arms race' by acquiring Hailun Chemical in 2020 through a 'snake-swallowing-elephant' deal, shifting its main business from textile dyeing to bottle-grade polyester chips and PTA, followed by massive capacity expansion.
The result was predictable: capacity increased, but profits did not follow. From 2023 to 2025, the company's losses widened, reaching 487 million yuan in 2024 and 885 million yuan in 2025. This is not a sudden decline in operational capability but an inevitable outcome of industry-wide supply-demand mismatch. When all major players ramp up PTA and bottle chip capacity, product spreads are compressed to near cost, and the larger the scale, the bigger the loss.
Single-Chain Vulnerability: Being Held Hostage by Upstream Raw Materials
Another fatal weakness of Sanfangxiang is its overly concentrated industrial chain layout. It only covers the PTA-to-polyester bottle chip segment, relying entirely on external purchases for its core raw material, PX. Once upstream PX prices rise due to crude oil fluctuations or supply tightness, the company has almost no ability to pass on costs. In 2025, its trading business revenue plummeted 59.97% year-on-year, a direct reflection of this fragility.
Compared with industry leaders (such as Hengli and Rongsheng) that have full chains from crude oil to PX, PTA, and polyester, Sanfangxiang's single-segment model has no buffer in price wars. When the industry cycle turns down, full-chain companies can smooth fluctuations through internal profit adjustments, while single-segment companies passively bear pressure from both upstream and downstream.
Debt Chain Reaction: Overlapping Guarantee Defaults and Audit Concerns
Beyond losses, a chain of guarantee defaults is accelerating risk transmission. As of the latest announcement, cumulative overdue debts for which Sanfangxiang provided guarantees to subsidiaries reached 522 million yuan, accounting for 10.82% of the most recent audited net assets. Among them, the full subsidiary Hailun Petrochemical defaulted on rent due to Taiping石化 Financial Leasing, and the company, as an irrevocable joint liability guarantor, could only 'actively communicate for extension.'
More concerning is the audit front. In the 2025 annual report, the company's accounts receivable from related parties stood at a staggering 3.561 billion yuan, but only 107 million yuan in bad debt provisions had been accrued. The auditor explicitly stated that sufficient and appropriate audit evidence for recoverability could not be obtained. Meanwhile, the controlling shareholder's shares have been judicially frozen, and 600 million yuan in related-party guarantees have not been recognized as estimated liabilities. Behind these numbers lies a huge black hole in corporate governance and financial transparency.
Anti-Involution Policy: Industry Turning Point or Short-Term Relief?
In the second half of 2025, relevant national authorities convened a symposium with major PTA and bottle chip producers, focusing on industry operations and project progress. Against the backdrop of severe supply-demand mismatch and razor-thin margins, this meeting was widely seen as a policy signal to prevent and defuse 'involution-style' competition. Sanfangxiang's turnaround in Q1 2026 and its recent stock price rebound, temporarily lifting it above the 1-yuan delisting warning line, partly benefit from market expectations shaped by this policy direction.
However, it must be recognized that anti-involution policies can curb disorderly new capacity additions but cannot quickly absorb the 8 million tons of already-built excess capacity. For the industry to truly exit the downturn, substantial demand growth (from beverage packaging, exports, etc.) and market-driven elimination of outdated capacity are needed. Although Sanfangxiang's controlling shareholder's share auction has been temporarily suspended due to objections, the unresolved risk of control change remains a Damocles sword hanging overhead.