February 15, 2017 / 11:36 AM / 7 months ago

BASF foam chemical plant suffers further setback

A truck drives past a warehouse of German chemical company BASF in Ludwigshafen, April 23, 2015. REUTERS/Ralph Orlowski

FRANKFURT (Reuters) - BASF (BASFn.DE) has suffered a further setback at its Ludwigshafen plant which makes materials for soft foams used in mattresses and car seats, saying a technical defect in a new reactor would reduce output into next year.

Production downtimes often raise global prices of the material, known as TDI, and BASF’s glitch might give a boost to competitors such as Bayer’s Covestro (1COV.DE), Wanhua (600309.SS), Mitsui (4183.T) and Dow Chemical DOW.N.

With 780,000 tonnes in annual capacity of TDI, BASF is the largest supplier in the market. BASF has spent more than 1 billion euros (0.88 billion pounds) on the Ludwigshafen complex, or roughly 20 percent of its annual investment budget for plant and equipment.

The German chemicals group had to stop production at the 300,000 tonnes-a-year complex at the end of November 2016 because of a damaged reactor.

Production with a smaller backup reactor will be restarted at reduced rates in the next few weeks, BASF said on Wednesday, followed by intermittent shutdowns, but it will take until some time next year for the replacement reactor to be delivered and fully ramped up.

Covestro, for its part, had to reduce output of precursor chemicals for both rigid and soft foams for almost three months late last year due to a supplier’s outages.

In a statement BASF said: “Due to the long delivery time for the new reactor, BASF expects the final repair work to be completed in 2018. The supply to customers is secured via BASF’s global TDI production network.”

Due to unforeseen complexities, BASF had previously been struggling to fully ramp up production at the TDI facility at Ludwigshafen, which was inaugurated in November 2015.

Additional reporting Patricia Weiss and Maria Sheahan; Editing by David Holmes

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