Lyocell fiber is experiencing an unprecedented expansion cycle. In June 2026, Grasim Industries, flagship of the Aditya Birla Group, announced an investment of ₹3,094 crore (~$324 million) to add 110,000 TPA of Lyocell capacity at its Harihar plant in Karnataka. This investment, rare in the recent chemical fiber sector, signals an accelerating substitution of viscose by Lyocell and a reshaping of the global cellulosic fiber competitive landscape.
Capacity Leap and Global Competition
The Phase II project includes two 55,000 TPA lines, each with a daily capacity of 150 tons. This single expansion will make Grasim's Harihar site one of the world's largest Lyocell production bases. According to China Customs and industry public data, global Lyocell capacity stood at about 600,000 tons in 2025, with China accounting for over 40% but individual plants averaging 50,000-100,000 tons. Grasim's 110,000-ton addition will directly challenge clusters like Shaoxing Keqiao and Shengze in China, which rely heavily on viscose and polyester. Lyocell's superior wet/dry strength and biodegradability make it a strong substitute for viscose in high-end apparel and home textiles. Post-expansion, Indian Lyocell export costs to China could drop further, pressuring domestic producers like Tangshan Sanyou and Sateri.
Supply Chain and Price Implications
The rapid Lyocell capacity build-up tightens the balance of dissolving wood pulp supply, currently sourced mainly from Brazil, Canada, and South Africa. Grasim, backed by Aditya Birla's pulp resources, enjoys a raw material cost advantage. For downstream buyers, Lyocell spot prices in 2025 were 15-20% higher than viscose, but scale effects could narrow this gap to under 10% by 2027. This makes Lyocell a more viable option for regular fabric sourcing, especially for high-count, high-density fabrics and eco-certified orders.
From an export perspective, EU and North American markets increasingly favor Lyocell. The 2025 EU textile labeling regulation upgrade gave Lyocell a higher eco-score as a "regenerated cellulosic fiber." Grasim's expansion aligns with this trend: India, as a GSP beneficiary, enjoys tariff advantages for Lyocell exports to Europe. Chinese exporters sticking with viscose may lose price competitiveness in high-end Western bids.