The MySteel 62% Australian iron ore fines price hit a six-year high of US$128.50 per tonne this week.
Macquarie has lifted its forecast for 2020 by 14% to $105/t, and by 27% to $100/t for 2021.
"Sustained strength in Chinese steel demand driven by construction, infrastructure, and real estate, combined with a weaker supply recovery from Brazil, has transformed the supply/demand fundamentals for ironore, With deficits now forecast through to CY22," it said yesterday.
The stronger forecasts has led to FY21 earnings upgrades of 29% for BHP, 45% for FMG, 47% for MinRes and 74% for Mount Gibson Iron.
Rio's earnings are expected to be 38% higher in the 2021 calendar year, while Champion Iron's rise 39%.
Macquarie's FY22 iron ore price forecast is up 26% to $86.25/t, leading to higher earnings upgrades of 33% for BHP, 76% for FMG, 76% for Mount Gibson, and 112% for MinRes, while Rio's CY22 earnings rise 46% and Champion's rise 119%.
The increases translated to only modest price target upgrades of 4-6%, aside from Champion, up 12%.
"The upgrades to our iron ore price forecasts have transformed the earnings outlook for the ASX listed iron-ore producers," Macquarie said.
"We now expect FMG, BHP and RIO to all be able to deliver strong free cashflow and dividends in FY21 and FY22."
UBS also lifted its iron ore forecasts, but was less bullish.
It lifted its 2020 price forecast to $98/t from $91/t) and added $5/t to its forward curve out to 2023, equating to an average price of $85/t next year, $75/t in 2022 and $70/t in 2023.
UBS said prices were unsustainable at these levels and expected iron ore to fall back below $100/t by the end of the year.
Its forecast increases lifted 2021 estimated earnings per share for the major iron ore miners by up to 28%.
UBS' preferred iron ore stocks are FMG, BHP and Vale, all of which have buy ratings.