Reuters reported that iron ore slipped from 2-1/2 month peaks as Chinese buying interest slowed after a recent rapid rise in prices but fewer available spot cargoes from top exporter Australia are likely to limit declines in prices.

The price of iron ore, China's top commodity import by volume, has risen nearly 13% so far in July and is on course for its biggest monthly rise since last December, buoyed by firmer Chinese steel prices.

According to data provider Steel Index, ore with 62% iron content .IO62-CNI=SI, the industry benchmark, slipped 0.2% to USD 131.50 per tonne on Monday. Iron ore hit USD 131.90 last Thursday, its highest since April 30.

A Hong Kong based iron ore trader said that we are still seeing enquiries for cargo as spot availability remains tight. I think prices will be supported at USD 129.

The trader said that Chinese mills have been seeking immediately deliverable shipments from Australia, helping lift freight rates from Australia to China.

The benchmark freight rate for capesize vessels from Australia to China stood at USD 7.73 per tonne on Monday up from 1 month lows in early July. Recent heavy rains hit parts of Australia's iron ore rich Pilbara region, leading to a huge backlog for China bound supply.

Global miner Rio Tinto is selling 235,000 tonnes of 61% grade Australian fines at a tender closing later on Tuesday. Rio sold a similar grade cargo at AUD 133 per tonne last week and traders see the latest shipment coming in lower with current offers for Pilbara fines slipping to AUD 131.

High steel output has sustained China's appetite for iron ore. China's crude steel output rose 4.6% from a year ago to 64.7 million tonnes in June, boosting global output by almost 2% to 132 million tonnes.

Australian miner Fortescue Metals Group expects iron ore prices to trade between AUD 110 and AUD 130 for the remainder of 2013, citing steady demand from Chinese steel mills.