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MANILA: Dalian iron ore futures edged up on Tuesday, supported by persistent hopes of China easing its COVID-19 rules, though traders tempered their optimism about the world’s top steel producer reopening its economy as new cases sharply escalated.

The most-traded January iron ore on China’s Dalian Commodity Exchange ended morning trade 0.5% higher at 665.50 yuan ($91.96) a tonne, rising for a sixth straight session.

The steelmaking ingredient’s Dalian contracts for February and beyond posted bigger gains amid expectations that any major shift in China’s COVID containment policy could be undertaken in 2023.

On the Singapore Exchange, benchmark December iron ore was up 0.1% at $86.25 a tonne, as of 0421 GMT, after a volatile morning session. “We believe that relaxation from existing measures is more likely after 2022,” ING economists said, following a Wall Street Journal report saying Chinese leaders are considering steps toward reopening, but are proceeding slowly and have set no timeline.

For now, iron ore’s rebound appeared to have been tempered amid weakening steel demand in China, which has prompted some mills to curb operations to minimise losses.

“We expect negative margins, winter steel output curbs and the zero-COVID policy to subdue demand until early Q1 2023,” ANZ commodity strategists said in a note.

COVID-19 cases sharply escalated in Guangzhou and other major Chinese cities, with the global manufacturing hub fighting its worst flare-up ever and testing its ability to avoid a Shanghai-style citywide lockdown.

China has reaffirmed its adherence to a “dynamic-clearing” approach to COVID cases as soon as they emerge, dashing hopes of a quick reopening of the economy.

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