The global cellulosic fiber capacity is undergoing a rapid realignment. On June 8, 2026, Grasim Industries, the flagship of the Aditya Birla Group, announced an investment of ₹3,094 crore (approximately $324 million) to build Phase II Lyocell capacity of 110,000 TPA at its Harihar plant in Karnataka. This investment will double the group's total Lyocell output to over 220,000 TPA, directly reshaping the supply landscape of regenerated cellulosic fibers.
Capacity Strategy: From Viscose to Lyocell
This expansion is not an isolated move. As one of the world's largest viscose staple fiber producers, Aditya Birla has been shifting capital expenditure from traditional viscose to eco-friendly Lyocell over the past five years. The Phase II project consists of two 55K TPA lines (150 tons per day), using the group's proprietary solvent spinning technology with a solvent recovery rate exceeding 99.5%. This technological shift is a direct response to the EU's Ecodesign for Sustainable Products Regulation, which tightens chemical management in textiles. Lyocell production eliminates the use of carbon disulfide and reduces wastewater discharge by approximately 70% compared to viscose.
From a regional perspective, the Harihar plant is located in Karnataka, southern India, adjacent to the Bengaluru textile cluster, which has mature processing and weaving facilities. By expanding here, Grasim can leverage existing infrastructure to reduce marginal costs and shorten delivery times to key export markets, especially the EU and the Middle East, through India's trade agreements.
Market Impact: Accelerated Substitution of Viscose
What does 110,000 tons of new Lyocell capacity mean for the global regenerated cellulosic fiber market? Industry data shows that global Lyocell capacity stood at about 550,000 tons in 2025, with Aditya Birla and Lenzing collectively holding nearly 70% of the share. After this expansion, Grasim's capacity will jump from 110,000 to 220,000 tons, significantly narrowing the gap with Lenzing.
More critical is the cost structure shift. According to China Customs data, the average import price of Lyocell fiber in Q1 2026 was about $2.8/kg, compared to $1.6/kg for viscose staple fiber. However, Lyocell's superior dry and wet strength gives it a growing substitution advantage in high-end denim, home textiles, and underwear. For instance, Lyocell-blend denim offers 30% better wash durability than pure cotton, along with natural antibacterial properties. The economies of scale from Grasim's expansion are expected to lower Lyocell production costs by 15%-20%, further squeezing viscose's position in mid-range markets.
Upstream and Downstream Effects: Changing Sourcing Logic
For spinners and fabric buyers, the doubling of Indian Lyocell capacity means a fundamental shift in raw material supply dynamics. First, supply stability improves: previously, global Lyocell capacity was heavily concentrated with Lenzing in Austria and Tangshan Sanyou in China. Grasim's expansion creates a three-player landscape, allowing buyers to negotiate prices among Indian, European, and Chinese sources. Second, certification barriers lower: Aditya Birla's Lyocell is OEKO-TEX and FSC certified, providing a 'zero-risk' raw material option for brands exporting to the EU.
However, the pace of capacity release must be monitored. The Phase II project is expected to take 20-24 months, with actual production starting in the first half of 2028. During this period, the utilization rate of Grasim's Phase I line will be a key indicator. If Phase I runs below 85% capacity, Phase II could face delays.