The global cellulosic fiber industry is witnessing a capacity race, with an Indian giant making a significant move.
Background
Grasim Industries, the flagship company of the Aditya Birla Group, announced on June 8, 2026, an investment of INR 3,094 crore (approximately $324 million) for Phase II lyocell capacity expansion at its Harihar plant in Karnataka. The expansion will add 110,000 tons per annum (TPA) of lyocell capacity, consisting of two lines of 55,000 TPA each, with a daily output of about 150 tons per line.
Harihar is an existing production hub for Grasim, and this Phase II investment significantly boosts the site's total lyocell capacity. As the world's largest viscose staple fiber producer, Aditya Birla Group's move into lyocell underscores its strategy to capture growth in the high-end cellulosic fiber segment.
Industry Impact
Lyocell, a next-generation green regenerated cellulosic fiber, uses a closed-loop solvent process with minimal pollution, gradually replacing some viscose and cotton applications. Grasim's expansion will reshape global lyocell capacity dynamics.
- For upstream raw materials: Lyocell primarily uses dissolving pulp. The 110,000 TPA new capacity will drive demand for dissolving pulp, especially softwood and hardwood kraft pulp. China, a major importer of dissolving pulp, may face tighter supply.
- For downstream textile mills: Lyocell is priced higher than ordinary viscose but lower than premium long-staple cotton. Its excellent moisture absorption, strength, and drape make it popular in high-end shirts, denim, underwear, and home textiles. Increased supply stability may encourage more brands to include lyocell in regular procurement.
- For nonwovens: Lyocell is gaining traction in wet wipes, facial mask substrates, and other disposable hygiene products. Grasim's expansion will provide a more stable raw material source for nonwovens customers.
From a price transmission perspective, new capacity typically takes 18-24 months to ramp up. By the second half of 2028, global lyocell supply will increase significantly, potentially putting downward pressure on currently high lyocell prices. For buyers, supply security remains more critical than short-term price fluctuations.