The Aditya Birla Group is setting up a viscose staple fibre (VSF) plant in Turkey at an investment of $500 million (`2,650 crore).
The announcement to add capacity comes when the textile industry is going through tough times with fibre prices trending downhill.
The 180,000 tonne per annum (tpa) fully integrated plant to be developed in two phases would be commissioned by early 2015 and have a captive power plant, a carbon sulphide plant and a sulphuric acid unit.
Around 80% of this VSF capacity would be sold to industries in Turkey and the rest exported to markets including European Union and other neighbouring countries.
With the Turkish foray, the group would have pulp and fibre operations in seven countries. It has plants in Canada, Sweden, Thailand, Indonesia, China and India.
A global leader in the VSF, the AV Birla group holds a 21% market share with close 750,000 tpa capacity, which it is looking to ramp up to 1.1 million tonne by 2015.
Kumar Mangalam Birla, chairman, AV Birla Group, said in a statement, “For us, VSF is a core business. Our aspiration is to significantly ramp up our global market share and our capacities by the turn of the decade. Establishing a world-class plant in Turkey is a step in this direction.”
Though the Turkey plant would come onstream in five years, the short-term outlook of VSF prices, however, is not encouraging.
A senior official of a textile company, which is a customer for AV Birla Group’s VSF division, said, “The overall textile sector is in a bad shape. All fibre prices — cotton, polyester and VSF — have been on a downward trend. This is mainly due to uncertainty in the global markets.” He said domestic demand for VSF has weakened in the past two quarters may correct more in the next few months. In the past two quarters, domestic VSF prices have fallen from `158 per kg to around `121 per kg now. The current prices are, however, higher than year-on-year prices.
Analysts said the group has never merged its foreign VSF capacities with the Indian company.
“Grasim had taken a one-third stake in the Swedish pulp company Domsjo Fabriker, which was initially bought by the Aditya Birla Group. It remains to be seen whether this would remain within the group or Grasim takes a stake later,” said an analyst from a foreign research firm.