At time of writing, the share price of the big three iron ore...

At time of writing, the share price of the big three iron ore miners are all up, with BHP Group Ltd [ASX:BHP], Rio Tinto Ltd [ASX:RIO] and Fortescue Metals Group Ltd [ASX:FMG] all tacking on 2–3% today.

The chart below makes for interesting reading with the FMG share price (blue line) giving way to the Rio Tinto share price (orange line) in the race up the charts in the last 12 months:

Source: tradingview.com

So today, we ask, should you invest in the iron ore miners? What’s the outlook for BHP, Rio and FMG?

We breakdown recent movements in the iron ore price.

Iron ore defies expectations again — why is iron ore up?

The answer lies in firm Chinese demand, despite their best efforts.

As per coverage in the Australian Financial Review:

‘Benchmark iron ore surged back above the $US200 a tonne mark, based on pricing by Fastmarkets MB and S&P Global Platts, challenging bets by some market strategists that the steel making material is poised to drop sharply.

‘Fastmarkets said iron ore rose $US9.84 or 4.9 per cent to $US208.67 a tonne on Tuesday; extending Monday’s 4.3 per cent rise.

‘S&P Global Platts said its key index rose $US10.35 or 5.2 to $US209.10 a tonne.

‘“As long as demand globally remains strong (including China) and markets are tight, we think it is unlikely China’s authorities will be able to push prices down on a sustained basis,” Bank of America said in a note.

‘Bank of America forecasts iron ore will average $US172.2 a tonne this year; then $US143.8 a tonne in 2022; it sees a slow grind lower through 2025 when it will end below the $US100 mark.’

US$172.2 a tonne on average this year should provide the big three iron ore miners plenty of ‘cream’, or margin on their operations.

I’d even venture out on a limb and say the major three iron ore miners are due for an earnings beat.

You can see analyst forecasts of their earnings below via Market Screener:

FMG forecasted financials

Source: Market Screener

BHP forecasted financials

Source: Market Screener

Rio forecasted financials

Source: Market Screener

According to these numbers, FMG is clearly the cash cow with a mind-boggling return on equity (ROE) of 53% ( should be 63%) for 2021. Rio is no slouch either, given its size; 40.8% is massive.