The global regenerated cellulose fiber market is facing a new variable. Grasim Industries, flagship of the Aditya Birla Group, announced an investment of INR 3,094 crore (approximately USD 324 million) for Phase II of its Lyocell capacity at Harihar, Karnataka. The project adds 110,000 tonnes per annum (TPA) capacity, split into two lines of 55,000 TPA each, with a daily output of 150 tonnes per line.
Capacity Leap and Global Competitive Landscape
This investment brings Grasim's total Lyocell capacity to 220,000 TPA, firmly placing it in the top tier of global cellulosic fiber producers. The first phase at the same site already had 110,000 TPA capacity; Phase II doubles that. For China's viscose staple fiber (VSF) industry, this is not a distant development. Grasim's Lyocell products hold clear advantages in environmental certification and cost control—its closed-loop production process recovers over 99.7% of the solvent, while most Chinese VSF plants still rely on the traditional carbon disulfide method.
On the price side, Lyocell currently trades at a premium of USD 200-300 per tonne over standard VSF. However, as Grasim's scale effects kick in, that spread is narrowing. This means domestic VSF mills that rely on low-cost strategies will face more direct substitution pressure. Customs data shows that India's Lyocell exports to China grew 34% year-on-year in 2025, a trend likely to accelerate after Phase II comes online.
Transmission Along the Supply Chain: From Raw Material to Fabric
The impact of Lyocell capacity expansion is rippling downstream. In fabric hubs like Keqiao and Shengze, inquiries for Lyocell blended fabrics (e.g., Lyocell/cotton, Lyocell/polyester) have risen noticeably since Q1 2026. A Shaoxing fabric trader reports that orders for Lyocell-based products have increased over 40% year-on-year, mainly replacing high-count combed cotton or modal fabrics.
For spinning mills, Lyocell offers good spinnability and high fiber strength, suitable for high-speed air-jet and ring spinning. However, its wet strength drops quickly, requiring careful process adjustment. In weaving, Lyocell's high moisture swelling rate demands modified sizing parameters and humidity control to avoid warp defects. These technical details will determine who capitalizes on the Lyocell wave.
Policy and Standards Window
The Indian government has recently offered capital subsidies through the Production Linked Incentive (PLI) scheme for textile upstream investments, which likely supported Grasim's project. Meanwhile, the EU's proposed Ecodesign for Sustainable Products Regulation (ESPR) imposes stricter requirements on microfiber release and biodegradability. Lyocell, as a biodegradable regenerated fiber, naturally aligns with this direction. China's national standard GB/T 41562-2022 for Lyocell staple fiber has been in place for two years, but enforcement remains uneven, with some products still marketed as "Lyocell" despite being modified viscose.