Iron ore price soars: Time to buy Fortescue Metals Group Limited shares?

The Fortescue Metals Group Limited (ASX:FMG) share price could be one to watch after the iron ore price continued to climb higher…

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The Fortescue Metals Group Limited (ASX: FMG) share price could continue its strong run today after the iron ore price continued to rally higher.

According to Metal Bulletin, the iron ore price has had a strong start to the week, leading to the benchmark 62% fines index rising to US$76.17 per tonne overnight.

The 58% fines is also higher, rising US$1.88 to US$65.17 per tonne.

Unsurprisingly the UK-listed shares of Rio Tinto Limited (ASX: RIO) have climbed higher on the news, possibly hinting at another strong day of trade ahead for its Australian equivalents.

This will be especially pleasing for its shareholders who yesterday saw Rio Tinto's shares reach a six-month high of $66.77.

Should you invest in the iron ore miners?

If you believe that Chinese demand will outstrip the expected rise in supply, I would suggest you consider an investment in one of the iron ore miners today.

My preference in the industry would have to be Fortescue Metals.

With its management expecting its ultra-low costs to fall even further in FY 2018, Fortescue certainly is in a strong position to deliver bumper profit growth next year.

Furthermore, the strong free cash flow it generates should allow the miner to provide its shareholders with a generous dividend in the future as well, just as long as prices remain favourable.

But whether or not prices remain favourable is impossible to know.

Right now demand from China appears to be unrelenting, but as we have seen in the past, things can change very quickly and the iron ore price could be back around the US$50 per tonne level before you know it.

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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