* Axes polystyrene plant as recession saps demand
* BASF continues efforts to sell flagging business
* No jobs to be cut as part of move
* Shares down 2.5 percent
(Adds details, background)
FRANKFURT, June 25 (Reuters) - BASF will dismantle a plant producing plastics for packaging, stepping up efforts to permanently cut capacity as demand shows little signs of recovery.
The world's largest chemicals maker said the closure of a polystyrene plant -- part of a business it has been trying to sell for two years -- will reduce BASF's annual output capacity for the standard plastic in Europe by about 15 percent.
It had previously announced plant closures in Spain, the United States and South Korea.
BASF's shares fell 2.5 percent to 28 euros at 0908 GMT, underperforming the European DJ Stoxx Chemicals Index, which was down 1.9 percent.
The European chemical industry, depending on the ailing car, construction and electronics industries, is suffering from a slump in sales volumes approaching a third and is using little more than 70 percent of its output capacity.
The move comes after a Japanese daily reported in April that rival Mitsubishi Chemical Corp will exit the polystyrene and PVC businesses.
BASF, which expects sales and earnings to decline this year, in April idled one of its two steam crackers, which produce the basic petrochemical ingredients for its products, at its headquarters for at least three months.
BASF's polystyrenes are used for disposable packaging, refrigerator linings and as housing material. The business had been under pressure from low-cost rivals even before the current slump in demand started.
No jobs will be cut as part of the closure, the company added.
(Reporting by Ludwig Burger)