(The opinions expressed here are those of the author, a columnist for Reuters.)

LAUNCESTON, Australia - China is on track to import record volumes of iron ore in October, increasing the divergence between the demand for the steel raw material and the still weak output of the finished product.

China, which buys almost three-quarters of global seaborne iron ore, is likely to import as much as 120 million metric tons this month, according to vessel-tracking and port data.

This would be a strong rise from the official customs number of 104.1 million tons in September, and also represent an all-time high, eclipsing the previous record of 112.7 million in July 2020.

The strength in iron ore imports stands in sharp contrast to the softness in steel production, which slid for a fourth consecutive month in September, dropping to 77.07 million tons, down 1.1% from August and 6.1% from the same month in 2023.

China's steel output for the first nine months of the year was 768.48 million tons, down 3.6% from the same period in 2023, according to data released by the National Bureau of Statistics last week.

If there is a positive from the September steel production data, it's that the pace of decline slowed from the 10.4% on-year drop in August.

Whether the drop in steel output can be lifted to show an increase in the next few months largely depends on whether steel mills see rising demand on the back of Beijing's stimulus efforts.

September was too early for any kick higher in steel demand, given the major stimulus announcements were just before month end.

However, if the measures to boost the ailing property sector do bear fruit, it's likely to only result in an increase in actual demand in 2025.

This makes the rush to buy more iron ore seem somewhat premature.

PRICE DRIVEN IMPORTS

October's imports are on track to reach 120.5 million tons, according to data compiled by commodity analysts Kpler, while LSEG analysts expect arrivals of 117.3 million tons.

It's likely that steel mills and traders took heart from the stimulus efforts announced by Beijing, but lower spot prices for iron ore may also have boosted buying.

The price of Singapore Exchange contracts dropped to the lowest in 22 months in September, hitting $91.10 a ton on Sept. 10.

They then traded in a narrow range around that level until the end of the month, meaning that much of the iron ore arriving in October would have been secured at relatively low prices.

Iron ore prices did surge in the wake of the stimulus announcements, reaching a three-month peak of $110.55 a ton on Oct. 7, before easing back to end at $104.21 on Monday.

A more sober reflection of when China's stimulus is likely to actually result in increased steel demand may have led to iron ore prices moderating, but it's worth noting they have still held onto most of the gains made since the October low.

The risk is that the strong import volumes end up being added to inventories, which could act as a drag on further price gains even if steel output does start to recover.

Port inventories monitored by consultants SteelHome rose in the week to Oct. 18, hitting 147.2 million tons, up from a five-month low of 145.8 million the prior week.

Stockpiles have risen strongly in the past 12 months, rising from a seven-year low of 104.89 million tons in the last week of October 2023 to a recent high of 151.8 million in late July.

The opinions expressed here are those of the author, a columnist for Reuters.

(Editing by Lincoln Feast.)