Iron ore prices may edge lower this week as Chinese mills slow their restocking of inventories, although limited availability of spot cargoes may keep prices not too far off 2-1/2-month highs reached last week.

Shanghai steel futures eased on Monday, after rising for three straight weeks, which may curb appetite for raw material iron ore.

"Some of my mill customers have suspended buying as they can not take cargoes at current high levels, and prices of inventories existing at ports are losing upward momentum now," said an iron ore trader in Beijing.

Benchmark 62-percent grade iron ore <.IO62-CNI=SI> inched down 0.2 percent to $131.70 a tonne on Friday, after hitting $131.90 on Thursday, its highest level since April 30, according to data provider Steel Index.

Iron ore, China's top commodity import by volume and the biggest revenue earner for global miners Vale and Rio Tinto , rose nearly 4 percent last week. It's up 13 percent so far in July, and may be headed for its best monthly performance since last December.

Some traders believe the limited supply of spot cargoes may help prices of the raw material hover around current levels in the near term.

"Traders are buying on fixed price as the quantity of mainstream ore remains limited for immediate delivery and they believe prices will remain strong in the near-term," said Peter Cho, an iron ore swap broker with ICAP in Singapore.

Traders are eyeing three tenders by Rio Tinto for pricing cues, including one closing on Tuesday for a cargo of 235,000 tonnes of 61-percent grade Australian Pilbara iron ore fines.

Last Thursday, Rio Tinto sold a cargo of Pilbara iron ore fines at $133 a tonne, up nearly $7 from a trade of a similar grade a week earlier, traders said.

A rebound in Chinese steel prices during the typically weak consumption month of July has sparked recovery hopes for the sector after a difficult first-half, but slowing economic growth makes it unlikely the gains will be sustained for long.