The global cellulosic fiber market is witnessing an accelerated capacity race. Grasim Industries, the flagship company of the Aditya Birla Group, has announced a ₹3,094 crore (approximately $324 million) investment for Phase II of its lyocell plant in Harihar, Karnataka, adding 110,000 tons per annum (TPA) of capacity. This single expansion surpasses the total annual output of many small- and medium-sized viscose plants worldwide.
Reshaping the Capacity Landscape
The expansion comprises two production lines, each with a capacity of 55,000 TPA, equating to a daily output of about 150 tons per line. Upon completion, Grasim's total lyocell capacity in Harihar will reach 220,000 TPA, positioning it as a direct competitor to Lenzing, the global market leader. Lyocell, as a next-generation eco-friendly regenerated fiber, features a closed-loop production process and high solvent recovery rates, making it a preferred substitute for traditional viscose in home textiles and apparel.
From a regional perspective, the Harihar site in southern Karnataka benefits from proximity to cotton and dissolving pulp sources, reducing raw material transport costs and electricity expenses. This geographical advantage gives Grasim a cost edge over European and Chinese producers. Although Grasim has not disclosed a specific timeline, industry sources expect the Phase II plant to reach full capacity by 2028, pushing global lyocell effective capacity beyond 800,000 TPA.
Supply Chain Ripple Effects and Competitive Pressures
For upstream dissolving pulp suppliers, the expansion implies an additional annual demand of approximately 130,000 tons of pulp, primarily eucalyptus and softwood grades. The current global dissolving pulp market is roughly balanced, but Grasim's concentrated procurement could temporarily lift pulp prices, squeezing margins for Chinese viscose mills that rely heavily on imports.
On the downstream side, the rapid release of lyocell capacity is reshaping the pricing structure of viscose staple fiber (VSF). In 2025, Chinese VSF prices fluctuated sharply, dropping from CNY 13,000 per ton at the start of the year to CNY 10,500 by year-end, a decline of nearly 20%. Lyocell, with its superior wet strength and environmental credentials, commands a premium of CNY 3,000–4,000 per ton in high-end fabric markets. Grasim's expansion will further erode VSF's market share in mid-to-high segments. Chinese viscose mills that fail to quickly ramp up lyocell or differentiated product lines risk losing export orders to Indian capacity.
Implications for China's Textile Clusters
China is the world's largest producer and consumer of VSF, yet lyocell accounts for only about 15% of its cellulosic fiber capacity. Traditional textile clusters in Shaoxing, Xiaoshan, and Nantong face dual pressures of raw material substitution and order diversion. Grasim's Phase II is not an isolated case—Lenzing's new lyocell line in Thailand started up in late 2025, and Chinese players like Sateri and Tangshan Sanyou are also accelerating their lyocell plans.
This suggests that over the next 3–5 years, lyocell will transition from a “substitute” to a “mainstream” fiber. For buyers, product development should pivot toward lyocell blends, especially with cotton, Tencel, and modal. For mills, mastering lyocell dyeing chemistry and recycling technology will become a key technical barrier.