* U.S. steel stocks down 10 pct since July tariff delay
* Trump official says "232" probe still in final review
* Steel "tariff rate quotas" a likely remedy - analyst
* Graphic: U.S. steel stock prices http://reut.rs/2hNmmXO
LONDON/WASHINGTON, Aug 15 (Reuters) - U.S. President Donald Trump is still expected to impose steel import tariffs on national security grounds despite the delay of a probe into the matter and pursuit of multilateral talks to reduce excess capacity, industry players and trade experts say.
U.S. steel stocks have fallen nearly 10 percent since Trump delayed the release of the so-called "Section 232" review of the U.S. steel industry last month, partly reflecting fears that his promises to protect the industry may not materialise.
But industry analysts say the falls might be overdone, and there is reason to think that import relief may still happen.
"Based on (Commerce Secretary Wilbur) Ross's recent statements and our discussions with trade lawyers engaged in section 232, we still expect measures that will have a positive impact on U.S. steel prices," said Seth Rosenfeld, a steel industry analyst at Jefferies in London.
"The most likely outcome is tariff rate quotas where the level of tariff changes dependent on the volume of imports. This structure serves as something of an upside cap on steel pricing so they do not get out of control," Rosenfeld added.
Trump launched the probe into whether steel imports compromise U.S. national security in April, boosting U.S. steel stocks, but said in July a final decision might have to wait until other top-priority issues are addressed.
Ross said he would defer to Trump's lead and also cited multi-lateral talks to reduce excess capacity, fuelling concern in the steel industry that the "232" review, initially scheduled to conclude in late June, might be scrapped or substantially watered down.
A Trump administration official told Reuters, however, that the steel probe remains active and "is still under the final stages of review within the administration".
He declined to comment on the possible timing of its release. By law, Ross has until mid-January 2018 to conclude his review. Trump would then have 90 days to act.
"Our hope and expectation is that there would be action on (section 232) sooner, rather than going the full time," said Tom Gibson, president of the American Iron and Steel Institute.
In a sign that some market players still anticipate a U.S. tariff move, steel import permit applications fell 12 percent in July from June, making up 28 percent of the market, according to U.S. Commerce Department data compiled by AISI.
Trump's planned steel restrictions are mostly aimed at persuading China, producer of more than half the world's steel, to cut excess production capacity, but direct imports from China into the United State have already fallen dramatically due to previous anti-dumping and anti-subsidy duties.
Instead, critics say broad new steel restrictions would hit U.S. allies such as South Korea, Japan, Germany and Turkey much harder, prompting warnings of retaliation against unrelated U.S. products. Diplomats also say "232" duties risk undermining the global trading system if national security becomes an accepted excuse to erect trade barriers.
Trump during his election campaign promised supporters in rust-belt states such as Pennsylvania and Ohio that he would restore steel and coal jobs.
U.S.-based trade analysts say Trump may still turn to steel import restrictions because he can invoke them without congressional approval after suffering recent legislative setbacks.
"The healthcare bill went down, that's a big loss. What is Trump going to do to shore up his base? He sees tough action on trade as a political winner. I think he'll return to the matter before the end of the year," said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics.
The steel investigation has also been caught up in Trump's efforts to secure China's cooperation to impose sanctions on North Korea. Trump has promised easier trade terms to Beijing if China helps rein in North Korea's nuclear and missile testing.
But on Monday, Trump was pressing ahead with a separate trade probe into China's intellectual property practices, a sign that the link between China trade and North Korea may be softening.
Steel users in the United States who rely on cheap steel, oppose steel import restrictions, which they say would cost jobs in their industries. The U.S. steel sector employs 147,000 people while manufacturing and construction employs 12.8 million.
(Editing by Tom Miles in Geneva and David Evans)