The global regenerated cellulose fiber market is entering a new round of capacity race. Grasim Industries, flagship company of the Aditya Birla Group, has announced an additional investment of ₹3,094 crore (approximately $324 million) for Phase II lyocell capacity in Harihar, Karnataka, with an annual capacity of 110,000 tons. This figure represents nearly one-tenth of the current global lyocell production capacity, implying that within three years, the lyocell supply landscape will be redefined.
Capacity Layout and Timeline
Grasim’s expansion is not an impromptu decision. The Harihar base is already one of India’s largest cellulosic fiber production sites, with Phase I lyocell coming online in 2025. Phase II involves two lines of 55,000 TPA each, with a daily output of about 150 tons per line, expected to reach commercial production by 2028. The investment intensity, at roughly ₹2.94 billion per 10,000 tons of capacity, is below industry average, reflecting Grasim’s cost control advantage in lyocell processing.
It is worth noting that Grasim’s lyocell expansion is not an isolated case. Over the past three years, China’s lyocell capacity has surged from under 800,000 tons to around 1.3 million tons, driven by companies like Tongkun, Xinxiang Chemical Fiber, and Sateri. Grasim’s entry shifts the global lyocell supply from a “China-dominated” to a “China-India bipolar” pattern. For buyers, this means significantly greater pricing leverage after 2028.
Impact on Viscose and Lyocell Pricing
The rapid expansion of lyocell capacity is reshaping the internal price relationships within regenerated cellulose fibers. Traditionally, lyocell has been 30-50% more expensive than viscose filament due to its complex process and higher costs. But as capacity scales up, this gap is narrowing. With Grasim’s Phase II, global lyocell capacity will exceed 1.6 million tons by 2028, likely compressing the price premium over viscose to under 15%.
For viscose producers, this is not good news. Lyocell outperforms ordinary viscose in moisture absorption, strength, and environmental profile, and end brands are accelerating the switch. Fast fashion giants like H&M and Inditex have explicitly required suppliers to increase lyocell usage. Grasim’s expansion will accelerate this substitution, potentially diverting orders from viscose filament and staple.
Raw Material and Trade Flow Changes
Lyocell’s primary raw material is dissolving wood pulp. Grasim has captive pulp capacity in India, but the 110,000-ton increment will require substantial imported wood pulp, boosting demand for softwood pulp from North and South America and indirectly affecting global pulp trade pricing. Meanwhile, once Indian lyocell capacity comes online, exports will target garment manufacturing hubs like Bangladesh, Vietnam, and Turkey, competing with Chinese lyocell exports.
Logistically, Harihar is located inland in Karnataka, about 350 km from Mangalore Port. Grasim will need to address the overland transport costs for both raw material imports and finished product exports, which could be a disadvantage compared to China’s coastal plants.