LAUNCESTON, Australia, June 11 (Reuters) - The strength in China's iron ore imports this year stands in stark contrast to the weakness in steel production and demand, setting up a dilemma as to how the contradiction will be resolved.

China, which buys about 75% of global seaborne iron ore, imported 102.3 million metric tons in May, according to customs data, marking a third straight month of arrivals of more than 100 million tons.

For the first five months of the year, imports of the key steel raw material were 513.75 million tons, a gain of 7%.

However, China's crude steel output fell in April to 85.94 million tons, down 2.6% from March and 7.2% from the same month in 2023, according to official data.

In the first four months of 2024, China produced 343.67 million tons of crude steel, down 3% year-on-year. While official numbers for May are yet to be released, data from the China Iron and Steel Association, which represents the country's biggest mills, suggest steel output is unlikely to have staged much of a recovery last month.

Steel mills are also suffering from weak margins, with data from price reporting agency Argus showing that in the last 10 days of May, profits for producing hot-rolled coil dropped by 20 yuan ($2.76) a ton to between 50 and 100 yuan.

Sentiment among steelmakers has yet to be lifted by Beijing's ongoing efforts to boost the key housing construction industry.

Steel demand and industry sentiment may rise in the second half as stimulus measures start to have an impact, but for now the reality of soft demand for steel is outweighing hopes for a recovery.

This begs the question as to how long iron ore imports can remain at robust levels. The rising imports haven't been used to make more steel -rather they have been used to rebuild inventories.

Port stockpiles monitored by consultants SteelHome rose to 147.3 million tons in the week to June 7, the highest in 25 months. They have been climbing steadily since reaching a seven-year low of 104.9 million tons in the last week of October, and are now 42.4 million tons higher.