* July imports third highest on record at 82.5 mln T
* Low prices driving sales despite weak steel demand growth
* China July steel exports up 14 pct to 8 mln T (Adds steel export figures)
By David Stanway
BEIJING, Aug 8 (Reuters) - China's iron ore imports jumped nearly 11 percent in July from the previous month, customs data showed, as buyers took advantage of lower prices for the steelmaking raw material and stocked up, despite weak domestic steel demand.
Demand from China, which buys around two-thirds of all the iron ore sold on global markets, has remained resilient, helping to justify surging production from major suppliers such as Rio Tinto and BHP Billiton , which has driven iron ore prices down by around a third this year.
July's total shipments of 82.52 million tonnes represented the third highest on record, with steel mills in China continuing to produce at high rates. Margins for steel mills have also improved as a result of lower iron ore and other input prices.
"The import numbers are generally pretty volatile and you get up months and down months - the June number looked a little low so July represents a higher number, but if you look at the averages over the quarter, it is pretty much in line," said Graeme Train, analyst with Macquarie in Shanghai.
Iron ore prices over July were relatively steady, remaining within a range of $93.60-$98.00 per tonne and ending the month at $95.60, up 1.9 percent from the end of June, with spot market activity relatively weak, according to data from The Steel Index .IO62-CNI=SI.
In a report published on Thursday, the China Iron and Steel Association (CISA) said that iron ore oversupply widened in July, adding that it expected prices to continue to edge downwards in coming months.
The weak prices have helped weed out some high-cost production from the market and benefited Australian producers, who have steadily raised their share of China's total imports.
Anglo-Australian Rio Tinto, the world's No. 2 miner which gets the lion's share of earnings from iron ore, took advantage of that trend and posted a forecast-beating 21 percent rise in first-half profit on Thursday.
Australia's share of Chinese iron ore imports was 61 percent of the total in June and 56 percent in the first half of the year, against about 50.8 percent for the whole of 2013.
STEEL OUTPUT SLOWS
Shipments to China from Port Hedland, Australia's main iron ore port, rose 4.8 percent on the month to a record high 30.57 million tonnes in July, suggesting that Australia's share of China's total imports increased further.
"The strength in shipments from Australia is knocking out just as many tonnes from high-cost producers in the global market as it is from high-cost domestic producers," said Macquarie's Train.
According to preliminary estimates by industry consultancy Custeel, average daily steel output in China fell 2.2 percent over the July 21-31 period, suggesting that producers were finally responding to weakness in demand.
With steel output starting to decline slightly and iron ore imports still at a relatively high level, a supply glut of the steelmaking ingredient could worsen, with imported ore stockpiles at major ports set to rise further in coming months.
While port inventories fell for two consecutive weeks to reach 111.95 million tonnes by August 1, they remain 46 percent higher than at the same time last year, according to data from SteelHome SH-TOT-IRONINV.
Chinese steel product exports were strong in July, rising 14 percent to 8.06 million tonnes, the customs data showed.
With actual domestic consumption remaining stagnant this year, producers diverted 97.2 percent of their additional output to overseas markets in the first five months of the year, according to CISA data.
British consultancy MEPS said this week that it expected China to export 73 percent of its increased steel output over the whole of 2014.
It said Chinese exports were also driving down overseas prices, and CISA has warned that domestic producers are at risk of further trade restrictions in the second half of the year. (Editing by Richard Pullin and Muralikumar Anantharaman)