The global race for lyocell fiber capacity is accelerating from a jog to a sprint. Grasim Industries, the flagship of the Aditya Birla Group, has just placed a major bet that reshapes the competitive landscape.
Capacity Leap: Harihar Site Poised as Global Lyocell Hub
On June 8, Grasim announced an investment of ₹3,094 crore ($324 million) for Phase II lyocell capacity at Harihar, Karnataka. The project adds 110,000 TPA, split into two 55,000 TPA production lines. Combined with the existing Phase I capacity of 92,000 TPA, the Harihar site will reach a total lyocell capacity of 202,000 TPA. This single base will account for nearly 10% of global lyocell output.
For buyers, this expansion signals two things: improved supply stability and potential price relief. Lyocell has historically traded at a 30-50% premium over viscose due to limited capacity. With a heavyweight like Aditya Birla scaling up, the supply-demand gap is expected to narrow by 2027.
Industry Impact: Viscose's 'Substitution Threat' Materializes
Lyocell outperforms viscose in wet strength, eco-friendliness, and dimensional stability. As the world's largest viscose producer, Aditya Birla is essentially competing against itself—cannibalizing traditional viscose with higher-value lyocell. This shift is particularly concerning for China, the largest viscose producer and exporter, which shipped over 500,000 tons of viscose staple fiber in 2025. European brands, driven by deforestation regulations, are accelerating the switch from viscose to lyocell, and Aditya Birla's capacity expansion aligns perfectly with this trend.
Cost & Supply Chain: India's Lyocell Price Advantage
Compared to Chinese lyocell projects, Aditya Birla's Harihar plant enjoys two structural cost advantages. First, raw materials: the group produces its own dissolving wood pulp in India, insulating it from global pulp price volatility. Second, energy: Karnataka offers abundant hydropower, and the site's proximity to ports reduces export logistics costs. The two 55,000 TPA lines, arranged in parallel, achieve economies of scale that lower unit investment and operating costs.
For Chinese lyocell producers, this means intensifying competition close to home. Domestic lyocell lines typically range from 30,000 to 50,000 TPA, and raw pulp is heavily imported from Brazil and South Africa. If Indian lyocell enters Southeast Asian and Middle Eastern markets at 10-15% below Chinese prices, export margins for Chinese makers will come under severe pressure.