Aditya Birla Group has decided to defer its $510-million (around ₹3,000 crore) plant in Turkey for producing viscose staple fibre (VSF), a raw material used for making home textiles and apparels.

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.

Though demand for VSF continues to grow globally, the overcapacity in China, created at the time of the VSF boom, has put pressure on realisations in the global markets. It has resulted in global prices declining by around 15 per cent.

Manohar Samuel, Global Business Development, Birla Cellulose, said: “The viscose market has been in a state of turmoil, and the returns are lower. The Turkey project is on, but has been delayed because of the capacity overhang in China.”

Announced in December 2011, the plant was to be the first VSF production facility in Turkey, and the investment was aimed at supporting the growth of its textile industry.

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

No expansion

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 December 2014, Austria-based Lenzing Group, too, decided to refrain from any new capacity expansion projects until market conditions improved. The Lenzing Group and the Aditya Birla Group are two global viscose fibre giants, and had reportedly gained capacity of above 800,000 tonnes a year each in 2013.

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