Shandong Fengyuan Chemical (SHE:002805) will become the supplier of a unit of BYD (SHE:002594, HKG:1211) in a three-year agreement signed by both parties, according to a Shenzhen Stock Exchange filing on Tuesday.

The Chinese chemical manufacturer, through subsidiary Shandong Fengyuan Lithium Energy Technology, will supply LFP materials to Huizhou BYD Battery, with both parties collaborating in the research and development of cathode materials until March 31, 2028.

Both parties will also collaborate for the development of lithium iron phosphate or LFP cathode materials.

Both Fengyuan Chemical's shares and BYD's Hong Kong shares dropped less than 4% in recent trade. BYD's Shenzhen shares fell less than 3%.