Aditya Birla puts its VSF plant project in Turkey on hold

Aditya Birla Group has decided to put its viscose staple fibre plant project in Turkey on hold as the viscose market has been in a state of turmoil and the returns are lower, according to Manohar Samuel, Global Business Development, Birla Cellulose.

The Turkey project is on but has been delayed because of the capacity overhang in China. Though demand for VSF continues to grow globally, the overcapacity in China, created at the time of the VSF boom, has put pressure on realizations in the global markets. It has resulted in global prices declining by around 15 percent.

Announced in December 2011, the plant was to be the first VSF production facility in Turkey, and the investment to the tune of $510 million (around Rs.3,000 crore) was aimed at supporting the growth of its textile industry. VSF, a raw material used for making home textiles and apparels.

While the facility was to address Turkey’s domestic demand, it would also have the potential to export about 20 percent to the European Union and other neighbouring countries.

Incidentally, the surplus VSF capacity in China, which has proved to be a major overhang on margins, has also stalled expansion projects of other stalwart VSF players.

End of December 2014, Austria based Lenzing Group, too, decided to abstain from any new capacity expansion projects until market conditions improved.

Lenzing Group and Aditya Birla Group are two global viscose fibre giants, and had reportedly gained capacity of above 800,000 tonnes a year each in 2013.

Turkey is the fourth largest consumer of viscose in the world, and its Adana Organised Industrial Zone was to host the Indian plant with an annual capacity of 180,000 tonnes.