Custom Compounding of Purchased Resins (U.S.) — Industry Primer

NAICS 2022 code 325991. A Histometrics primer for public- and private-market investors.

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1. Overview

Custom compounding is the "recipe kitchen" of the plastics world. A compounder buys finished plastic resin (the raw polymer pellets — polypropylene, nylon, polycarbonate, PVC and the like) that someone else already manufactured, then melts it, mixes in additives, colorants, fillers and reinforcements, and re-pelletizes it into a tailored compound built for one customer's specific part. The industry does not make the base polymer — that is a separate, far larger business — it adds performance and value on top of it [1][2].

Why an investor cares: compounds sit one step upstream of nearly every molded or extruded plastic part — car bumpers and under-hood connectors, wire-and-cable insulation, appliance housings, medical devices, food packaging. Demand tracks industrial production, autos, construction and packaging, and it is being reshaped by two durable trends: vehicle lightweighting/electrification and mandated recycled content [3][4]. It is a fragmented, largely private, mid-margin manufacturing niche — not a place with obvious household-name stocks.

Ways in. Public markets: a handful of listed players, most of which run compounding as one segment of a larger specialty-chemical business (Avient, Celanese, Trinseo, LyondellBasell in the U.S.; HEXPOL in Sweden). Private markets: this is where most of the industry actually lives — family-owned and private-equity-backed compounders (Ravago, RTP Company, Teknor Apex, Techmer PM, Washington Penn, Americhem, Aurora Material Solutions) that never trade publicly.

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2. What it is, and how it's structured

Scope. NAICS (North American Industry Classification System) code 325991 covers establishments primarily engaged in (1) custom mixing and blending plastics resins made elsewhere, and (2) reformulating plastics resins from recycled plastics products [1][2]. In plain terms: buy pellets, add a formulation, sell an upgraded pellet. The classification sits within manufacturing subsector 325 (Chemical Manufacturing); it expressly excludes virgin-resin polymerization (NAICS 325211) and finished plastics-product conversion such as molding film, pipe, bottles or profiles (subsector 326).

The typical product is sold by function, not chemistry: color concentrates and masterbatch (concentrated additive/pigment packages), flame-retardant grades, glass- or mineral-filled "engineered" compounds, conductive or wear-resistant compounds, thermoplastic elastomers (soft, rubber-like plastics), and post-consumer-recycled (PCR) grades.

The process. The standard continuous process uses accurately metered resin, powders, fibers and liquids; a co-rotating twin-screw extruder melts, disperses and homogenizes them; vacuum sections remove volatiles; and the material is filtered, cooled and pelletized. Equipment supplier Coperion describes the sequence as feeding, conveying, melting, dispersing, homogenizing, devolatilizing, filtering and pelletizing; typical engineering-plastics lines combine base polymers and additives with downstream glass-fiber feeding before strand pelletization [5][6]. PVC and other shear-sensitive formulations can use a two-stage or lower-shear arrangement.

Two business models coexist:

• Custom compounding — the compounder owns the resin, formulates it, and sells a finished compound at a markup that bundles material plus value-add.
• Toll compounding — the customer supplies the resin and pays a per-pound "toll" for machine time and expertise; asset-lighter, thinner margin, common for large-volume buyers with their own purchasing power [7].

Technical stickiness. The commercial work starts before the extruder. Laboratories match color, choose additives, make pilot batches and test rheology, strength, impact, heat aging, flammability, electrical behavior, migration or biocompatibility. After qualification, lot consistency and change control become critical. Once a compound is "specced in" to an OEM's part — especially in automotive, medical and electrical — the customer rarely re-shops it: changing compound can require new tooling trials, safety tests, regulatory documentation and OEM approval [8]. That specification lock-in, plus proprietary formulations, is the intangible moat in an otherwise commoditized field.

What it EXCLUDES (adjacent NAICS codes). This is important because the biggest names in "plastics" mostly sit outside 325991:

• 325211 — Plastics Material and Resin Manufacturing: firms that actually polymerize resin (Dow, ExxonMobil, LyondellBasell's base-resin business). Companies that make resin and compound it in-house are classified here, not in 325991 [1].
• 3261 — Plastics Product Manufacturing: molders and extruders that turn compound into finished parts (film, bottles, pipe, injection-molded components).
• 32552 — Adhesives; 325510 — Paints/Coatings and other 3259 chemical preparations.

Ownership mix. Overwhelmingly private. The federal data count 318 firms operating 414 establishments [9][10] — mostly small, single- or few-plant operators, with a long tail of niche specialists and a top layer of large multinationals. The SBA (Small Business Administration) treats anything up to 600 employees as "small" here [11], and most compounders comfortably clear that bar. For historical context, OSHA's 2024 Hazard Communication rulemaking reproduced 2017 Census Statistics of U.S. Businesses data showing 347 firms, 429 establishments and 20,597 employees — of which 184 firms had fewer than 20 employees [12].

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3. How big it is

Federal statistics for NAICS 325991 (our ground-truth figures):

Derived from those figures: average revenue is roughly $43 million per firm (about $33 million per establishment), and average pay works out to about $73,000 per employee — a capital- and material-intensive business with a modest headcount relative to its dollar sales [9][10].

The undercount caveat — this matters a lot here. The $13.7 billion is not the size of "all compounding done in the U.S." It only counts establishments whose primary business is custom compounding of purchased resins. A very large share of compounding is captive — done in-house by resin makers, by large molders, and by vertically integrated manufacturers — and those tons are classified under resin manufacturing (325211) or plastics-products (3261), not 325991. Independent market researchers, using a broader "all compound produced" definition, size the U.S. plastic compounding market at roughly $10–11 billion in 2024 and the global market in the tens of billions [3][4]. The two numbers are built on different fences: read the Census figure as "the independent, merchant custom-compounding trade," not as total national compounding output. Treat the market-research totals as forward-looking estimates rather than reported government facts. Commercial reports frequently combine custom compounds, proprietary resin grades, masterbatch, rubber compounds, recycled pellets and captive in-house compounding; their market-size figures are therefore not interchangeable with the U.S. Census industry.

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4. The investable universe

There is no pure large-cap "compounding" stock. Most public exposure comes through diversified specialty-chemical companies where compounding is a segment. The cleanest public exposures:

Foreign-listed engineering-resin majors (BASF, Covestro, Lanxess, SABIC, Mitsubishi Chemical, Asahi Kasei, Syensqo) also run U.S. compounding operations, but you can't buy the compounding exposure in isolation [3].

Major private / other owners — where most of the industry sits:

Others include Polymer Resources, Foster Corporation, and S&E Specialty Polymers. For private-market investors, this fragmented, family-succession-heavy roster is the deal-flow list.

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5. How the money works

Compounding is a spread (conversion-margin) business layered on top of a volume business. Owners make money on:

• Value-add per pound (the conversion margin). Selling price minus the cost of resin plus additives. Commodity, high-volume grades earn only a few cents a pound; specialty/engineered and highly-filled or flame-retardant grades — where formulation know-how and customer qualification matter — earn materially more. Toll-compounding fees for engineering plastics run roughly $0.50–$0.90 per kilogram for machine time and expertise [7].
• Volume (pounds shipped) × margin per pound, scaled by capacity utilization. Extrusion compounding lines are fixed-cost assets; keeping them full is the profit lever. Under-utilized lines bleed money; a plant running flat-out drops incremental volume nearly straight to operating profit.
• Mix. The shift from commodity color/masterbatch toward engineered, medical, EV and recycled grades is the margin story — this is why Avient's specialty portfolio earns higher margins than a plain toll house [13]. For reference, Avient's Specialty Engineered Materials segment recorded a 13.3% operating margin in 2025, while Color, Additives and Inks recorded 14.8% — though both segments include products outside a strict 325991 perimeter [13].

Resin as a pass-through — with a lag. Resin is usually 60–80%+ of cost. In principle it passes through to the customer, but price changes reach compounds on a lag, so margins expand when resin prices fall and compress when they spike. Contract design matters: commodity compounds may have formula pricing or frequent resets, while specialty formulations may be priced on performance or value-in-use. Celanese says Engineered Materials pricing is primarily value-based and generally independent of raw-material movements, which means margins can expand or contract as inputs move [16]. Compounders also carry meaningful working capital (resin inventory + receivables), so cash generation swings with commodity prices even when unit volumes are steady. Avient identifies polyolefins and other thermoplastics, titanium dioxide, pigments and specialty additives as principal inputs and warns that raw-material, electricity, fuel and logistics costs may not correlate with selling-price changes [13].

Industry pricing is visibly cyclical. The BLS producer-price index for custom compounds and color concentrates rose from 174.3 in December 2020 to 223.4 in September 2022, fell to 205.5 by December 2025, and recovered to 217.6 in June 2026 — consistent with pandemic-era resin shortages and freight inflation, subsequent destocking and input deflation, and renewed 2026 pricing [25]. Falling resin prices are not automatically favorable: they can force selling-price reductions, create inventory write-down risk and encourage customers to delay orders.

Stickiness. Once a compound is "specced in" to an OEM's part and qualified (especially in automotive, medical and electrical, where re-qualification is costly), the customer rarely re-shops it. That specification lock-in, plus proprietary formulations, is the intangible moat in an otherwise commoditized field.

Rules of thumb: think capacity utilization, value-add spread per pound, product mix, and resin-price timing — the classic levers of a mid-cyclical, converting manufacturer — not same-store sales, occupancy, or fee-on-assets.

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6. What drives demand

• Industrial production & GDP cycle. Compounds feed autos, appliances, construction, packaging and electronics; volumes rise and fall with those end markets, making the industry mid-cyclical [3]. Avient's customer markets span consumer, packaging, defense, healthcare, industrial, transportation, construction, telecommunications and energy [13].
• Automotive lightweighting and electrification (EVs). Replacing metal with reinforced plastic to cut weight is a structural tailwind; automotive is projected among the fastest-growing end segments [3][4]. EVs need far more compound per vehicle: a battery-electric car uses 2.5–4.0 km of wiring versus 1.0–1.8 km for a combustion car, plus flame-retardant, thermally stable grades for battery busbars, connectors and high-voltage cable [4]. Vehicle electrification raises demand for flame-retardant, electrically insulating, thermally managed and lightweight materials.
• Wire & cable and halogen-free flame retardants. The shift to HFFR (halogen-free flame-retardant) compounds — for safer smoke/toxicity behavior — is projected to move from ~40% of wire-and-cable compound demand toward 60%+ by 2035, a value-additive mix shift for compounders [4].
• Recycled content and the circular economy. Brand-owner pledges and state law are pushing PCR into compounds; suppliers now market grades with up to 50% recycled content [4]. California's SB 54 packaging regime requires, by 2032, a 25% reduction in plastic covered material versus baseline, recyclable or compostable covered material, and a 65% recycling rate for plastic covered material [26]. This is both a demand driver and a technical differentiator. Recycled-resin reformulation is explicitly part of NAICS 325991, and compounders can upgrade variable recycled feedstock with stabilizers, compatibilizers, fillers and virgin resin.
• Packaging and healthcare. Steady, less cyclical demand for food-contact color/additive masterbatch and medical-grade compounds. Healthcare and food-contact applications reward traceability, clean production and regulatory expertise.

Recycled material is not a drop-in equivalent in every application. Color, odor, contamination, polymer degradation and inconsistent melt behavior can raise scrap and testing costs. FDA treats recycled food-contact resin case by case because contaminants, unauthorized polymers or noncompliant additives may migrate into food [27].

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7. Regulation

Compounders are chemical manufacturers and processors, so they sit under several regimes — none industry-specific, but collectively binding:

• TSCA (Toxic Substances Control Act, EPA). Governs the chemical substances/additives used. New additives face EPA review, and the PFAS (per- and polyfluoroalkyl substances) reporting rule pulls in fluoropolymer processing aids and certain flame retardants/components — a live compliance and reformulation issue. EPA's TSCA PFAS rule reaches persons that manufactured or imported covered PFAS during 2011–2022 and requests information on identity, use, volume, byproducts, worker exposure and disposal; as of April 2026, EPA had moved the reporting window to begin 60 days after a forthcoming rule revision [28][29].
• FDA food-contact rules. Food-grade compounds and colorants must comply with the Federal Food, Drug, and Cosmetic Act and 21 CFR; recycled resin for food contact is vetted through FDA's "No Objection Letter" process rather than formal pre-market approval [27][30].
• OSHA hazard communication and process safety. The 2024 Hazard Communication revision defines combustible dust as finely divided particulates that pose a flash-fire or explosion hazard when dispersed — directly relevant to pigment, additive and polymer-powder handling in compounding operations [12]. Air permits (dust, volatile organics) and process-safety rules apply to extrusion operations.
• State and export rules. State extended-producer-responsibility and recycled-content mandates (California SB 54 and peers) shape demand [26]; exporters must also meet the EU's REACH and RoHS restrictions on hazardous substances.
• Additive phase-outs. Ongoing restrictions on certain flame retardants, heavy-metal stabilizers and phthalates force reformulation.

Net: regulation is a steady compliance cost and a reformulation treadmill, but also a demand creator — flame-retardant, halogen-free and recycled-content requirements all sell more specialty compound.

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8. Competitive dynamics & consolidation

Highly fragmented and unconcentrated. The federal concentration data confirm it: the top 4 firms hold just 22.3% of receipts, the top 8 35.6%, the top 20 60.3%, and the top 50 80.1%; the Herfindahl-Hirschman Index is only 240.6 — far below the 1,500 threshold the antitrust agencies treat as "moderately concentrated" [9]. In other words, a big multinational tier sits atop a long tail of hundreds of small regional and niche compounders.

Consolidation is slow but persistent. The economics favor scale (purchasing leverage on resin, R&D, plant utilization, OEM relationships), so the large players roll up smaller family businesses:

• Celanese bought DuPont's Mobility & Materials business and U.S. compounder Omni Plastics to deepen automotive/electrical compounding [15].
• HEXPOL acquired McCann Plastics (~$120M) and others in a steady bolt-on program [15].
• Avient reshaped itself into a specialty formulator, selling its distribution arm to H.I.G. Capital for ~$950M to concentrate on higher-margin compounds/colorants [15].
• Pritzker Private Capital agreed in 2025 to acquire a majority stake in Americhem alongside the founding family and management [23].
• Aurora Material Solutions, backed by Nautic Partners, has assembled PVC, elastomer and engineered-thermoplastic businesses through acquisitions [24].
• Private equity remains an active buyer of compounders, though 2023–24 deal volume cooled with higher interest rates; materials M&A in 2024 ran roughly flat with 2023 [15].

The competitive equilibrium: giants compete on breadth, R&D and global reach; small compounders survive on speed, custom formulation, service and niche end-markets. Barriers are moderate — extrusion capacity is expensive but not exotic, so differentiation comes from formulation IP and qualified customer relationships, not capital alone.

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9. Risks

• Resin-price and margin volatility. Feedstock (crude/natural gas → monomer → resin) swings drive both margins (pass-through lag) and working capital; a fast resin-price spike squeezes profits [3][7].
• Cyclicality and destocking. Tied to autos, construction and industrial output; 2022–23 saw sharp customer destocking that hit compounders' volumes [13]. A recession compresses utilization and margins together.
• Customer concentration and specification loss. Losing a spec'd-in OEM program (or an OEM insourcing compounding) can remove a plant's baseload volume. Specialty formulations may be sticky, but a program loss can leave a dedicated line underutilized.
• Commoditization / price wars in toll and commodity grades, where over-capacity crushes margins [7].
• Regulatory / reformulation risk. PFAS, flame-retardant and additive restrictions can strand formulations and require costly requalification [28][29]. Substituting a technically equivalent additive may still require customer reapproval.
• Substitution and captive integration. Large customers can build in-house compounding; base-resin makers can move downstream. An integrated resin producer can disadvantage an independent compounder by preferentially allocating material to its own downstream operation. Direct or inline compounding at a converter also removes an intermediate pelletization step.
• Recycling execution risk. PCR feedstock is variable in quality and supply; meeting recycled-content pledges without sacrificing performance is technically hard.
• Input risk. Resin allocation, refinery or cracker outages, tariffs, freight disruption and reliance on specialized additives that a customer has already qualified.

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10. How to invest, and the outlook

Public-market routes. There is no clean pure-play large cap. The most concentrated exposure is Avient (AVNT); broader, more diluted exposure comes via Celanese (CE) and LyondellBasell (LYB); Trinseo (TSE) is a small, higher-risk turnaround; HEXPOL (Nasdaq Stockholm) is the pure-play internationally, now with a separately reported thermoplastic-compounding segment [18]. Understand that in every case you are buying a specialty-chemical company where compounding is part of the story — read the segment disclosures, watch resin spreads, utilization and volume/destocking commentary, and treat dividend yield and valuation multiples as you would for any mid-cyclical industrial chemical name.

Private-market routes. This is genuinely where the industry lives. Hundreds of profitable, founder- or family-owned compounders face succession questions, and both strategics (Celanese, HEXPOL, Avient, Ravago) and private-equity sponsors are active consolidators. Direct acquisition, roll-up platforms, and minority growth capital into specialty/recycled-content compounders are the realistic private plays. Diligence should center on: revenue by formulation and end market; pounds versus price growth; resin pass-through clauses; gross spread per pound; customer and supplier concentration; qualification ownership; changeover scrap; plant utilization headroom; maintenance capital; formulation IP; environmental history; inventory aging; recycled-feedstock controls; whether intellectual property resides with the company or its customers; and exposure to structurally growing end-markets (EV, medical, HFFR wire-and-cable, PCR grades). Reported sales alone are especially misleading during resin inflation.

Near-term drivers (forward-looking). The structural tailwinds — automotive electrification, halogen-free wire-and-cable, and legislated recycled content — point to mid-single-digit volume growth and a favorable mix shift toward higher-margin specialty grades; independent researchers project the U.S. market growing at roughly a 7% CAGR toward 2030 [3][4]. Against that, the industry stays exposed to the industrial cycle and resin-price swings, so results will remain lumpy quarter to quarter even if the multi-year trajectory is up. The winners will be the compounders that move mix toward engineered, medical, EV and recycled grades and keep their lines full.

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Sources

1. U.S. Census Bureau, "2022 NAICS Definition: 325991 Custom Compounding of Purchased Resins." https://www.census.gov/naics/?details=325&input=325&year=2022
2. SIC/NAICS reference, "NAICS Code 325991 — Custom compounding of purchased resins" (2022). https://siccode.com/naics-code/325991/custom-compounding-purchased-resins
3. Grand View Research, "U.S. Plastic Compounding Market Size, Industry Report, 2030" (2024). https://www.grandviewresearch.com/industry-analysis/us-plastic-compounding-market-report
4. IndexBox, "Automotive Wiring / Wire-and-Cable and PE Compound Market Forecasts to 2035" (2025); Teknor Apex recycled-content compound launch. https://www.indexbox.io/blog/automotive-wiring-compounds-market-forecast-points-higher-toward-2035-as-vehicle-electrification-accelerates-demand/
5. Coperion, "Compounding — Plastics Industry Overview." https://coperion.com/en/industries/plastics/compounding
6. Coperion, "STS Twin-Screw Extruders — Configurations and Applications." https://www.coperion.com/en/products-services/extruders-compounding-machines/sts-twin-screw-extruders
7. Polymer Compounders, "The Ultimate Guide to Toll Compounding: Process, Costs & Vendor Selection" (2026). https://polymer-compounders.com/toll-compounding/
8. RTP Company, "Custom Engineering Services." https://www.rtpcompany.com/services/custom-engineering/
9. U.S. Census Bureau, 2022 Economic Census — Concentration ratios and receipts, NAICS 325991 (firm count 318; receipts $13.69B; CR4 22.3%, CR8 35.6%, CR20 60.3%, CR50 80.1%; HHI 240.6) (2022). https://www.census.gov/programs-surveys/economic-census.html
10. U.S. Census Bureau, County Business Patterns, NAICS 325991 (establishments 414; employees 21,623; annual payroll $1.587B; Q1 payroll $400M) (2023). https://www.census.gov/programs-surveys/cbp.html
11. U.S. Small Business Administration, "Table of Small Business Size Standards," NAICS 325991 = 600 employees (2023). https://www.sba.gov/document/support-table-size-standards
12. U.S. Occupational Safety and Health Administration, "Hazard Communication Final Rule — Economic Analysis" (2024). https://public-inspection.federalregister.gov/2024-08568.pdf
13. Avient Corporation, Form 10-K, FY2025, U.S. Securities and Exchange Commission (2026). https://www.sec.gov/Archives/edgar/data/1122976/000112297626000039/avnt-20251231.htm
14. StockAnalysis.com, "Avient (AVNT) Market Cap & Net Worth" (2026). https://stockanalysis.com/stocks/avnt/market-cap/
15. Plastics News, "Mergers and acquisitions in plastics compounding slower, but still active"; PlasticsToday, "Celanese to acquire U.S. compounder Omni Plastics"; SpecialChem, industry acquisitions (2022–2024). https://www.plasticsnews.com/news/mergers-and-acquisitions-plastics-compounding-slower-still-active
16. Celanese Corporation, Form 10-K, FY2025, U.S. Securities and Exchange Commission (2026). https://www.sec.gov/Archives/edgar/data/1306830/000130683026000031/ce-20251231.htm
17. Trinseo, Form 10-K FY2024, U.S. Securities and Exchange Commission (2025). https://s29.q4cdn.com/805102073/files/doc_financials/2024/ar/Trinseo-Form-10-K-2024.pdf
18. HEXPOL AB, 2025 Annual Report with Sustainability Report (2026). https://www.hexpol.com/wp-content/uploads/2026/04/file-2025-HEXPOL-Annual-Report-with-Sustainability-Report.pdf
19. Wikipedia, "Ravago" (family-owned compounder/distributor; plant and volume figures) (2024). https://en.wikipedia.org/wiki/Ravago
20. RTP Company, "About RTP Company"; RocketReach company profile (~$460M revenue; Winona, MN) (2024). https://www.rtpcompany.com/about/
21. Teknor Apex Company, "Company History." https://www.teknorapex.com/en-us/about/history
22. SpecialChem, "2026 Top 100 Plastics & Elastomers Suppliers"; Washington Penn / Audia Group and Techmer PM profiles (2026). https://business.specialchem.com/blog/2026-top-100-plastics-elastomers-suppliers
23. Americhem, "Pritzker Private Capital Agrees to Invest in Americhem" (2025). https://www.americhem.com/news/pritzker-private-capital-agrees-to-invest-in-americhem/
24. Aurora Material Solutions, "About Aurora Material Solutions." https://www.auroramaterialsolutions.com/company/about-aurora-material-solutions/
25. U.S. Bureau of Labor Statistics, Producer Price Index — Custom compounds and color concentrates (Series PCU3259913259910), via FRED (2026). https://fred.stlouisfed.org/data/PCU3259913259910
26. California Department of Resources Recycling and Recovery (CalRecycle), "SB 54 Plastic Pollution Prevention and Packaging Producer Responsibility Act — Requirements." https://calrecycle.ca.gov/laws/rulemaking/sb54regulations/
27. U.S. Food and Drug Administration, "Guidance for Industry: Use of Recycled Plastics in Food Packaging — Chemistry Considerations." https://www.fda.gov/regulatory-information/search-fda-guidance-documents/guidance-industry-use-recycled-plastics-food-packaging-chemistry-considerations
28. U.S. Environmental Protection Agency / Assent, "TSCA PFAS reporting rule — impacts" (2024). https://www.assent.com/resources/pfas-compliance/pfas-epa-announcement/
29. U.S. Environmental Protection Agency, "Update on Reporting Deadline for TSCA PFAS Reporting Rule" (April 2026). https://www.epa.gov/chemicals-under-tsca/update-reporting-deadline-tsca-pfas-reporting-rule
30. U.S. Food and Drug Administration, "Recycled Plastics in Food Packaging" (2024). https://www.fda.gov/food/packaging-food-contact-substances-fcs/recycled-plastics-food-packaging