Silver Surges Suddenly! Peru’s Energy Crisis Squeezes the Global Supply 'Lifeline'

Recently, silver has surged strongly—the key trigger being Peru’s outbreak of an energy crisis. As the world’s top silver-reserve country, Peru’s acute energy shortage is directly undermining global silver supply, widening the supply-demand gap and driving prices sharply higher. I. Peru’s Energy Crisis in Focus: Power Rationing and Production Halts—Silver Supply Under Pressure On May 11, 2026, the Peruvian government officially signed Emergency Decree No. 003-2026 on the Energy Crisis, effective until December 31, 2026. Its core provision prioritizes residential electricity supply, while industrial power—including for mines and smelters—is subject to strict rationing, directly disrupting silver production. As the world’s largest holder of silver reserves, Peru’s silver output is vital to the global market. Data shows that in 2025, Peru’s mine-produced silver reached 3,600 metric tons—approximately 13.6% of global mine silver output—and the vast majority is exported. The energy crisis has directly caused a decline in Peru’s silver output, exacerbating an already-tight global silver supply and further widening the supply-demand gap. Peru’s energy crisis → industrial power rationing/production halts → falling silver output → widening supply-demand gap → soaring silver prices. II. Dual Pressures: Underlying Causes of Peru’s Energy Crisis Peru’s current energy crisis is no accident—it results from the convergence of domestic vulnerabilities and external shocks, with the core problem centered on the operational collapse of state-owned oil company Petroperú, compounded by external pressures. 1. Domestic Vulnerability: Petroperú Nears Bankruptcy; Diesel Supply Crisis Intensifies Petroperú, Peru’s fuel supply monopoly responsible for refining, transportation, and sales, launched the Talara Refinery modernization project in 2014. Soaring inflation and other factors doubled its costs; though completed in 2023, the facility has since operated at a continuous loss. By early 2026, Petroperú had accumulated $2.5 billion in losses over four consecutive years, and its credit rating has plummeted to junk status—placing it on the brink of shutdown. Despite cumulative government bailouts totaling $5.3 billion, the company’s downward spiral remains unabated. In 2025 alone, it posted a $774 million loss. Management instability has worsened—four CEOs have been replaced since late 2025. Since February 2026, its core refineries have operated at less than 50% capacity, with some intermittently shutting down; actual supply capacity stands at only 40–50% of normal levels—triggering severe diesel shortages that constrain heavy equipment operation at mines and smelting production. 2. External Shocks: Natural Gas Supply Disruption + Soaring Oil Prices—Compounding the Crisis On March 6, 2026, a rupture occurred in Peru’s main natural gas pipeline linking Cusco to Lima, cutting off 90% of national natural gas supply. Since natural gas accounts for 60% of Peru’s total power generation, localized blackouts ensued. The government prioritized residential electricity, imposing strict power rationing on mines and industry. Copper output in March fell 10–15% month-on-month, with silver output similarly pressured. Although the pipeline was later repaired, gas supply capacity remains limited to just 30–40% of full capacity—insufficient for stable operations. Meanwhile, the Middle East crisis erupted at the end of February 2026, sending crude oil prices soaring. Petroperú relies almost entirely on imported crude, yet soaring input costs cannot be passed on due to government price controls—deepening its debt crisis. At one point, the company lacked funds even to purchase crude, pushing refineries toward complete shutdown and driving national diesel inventories below critical levels.

From Peru’s Energy Decree to Global Copper Market Repricing

I. Peru’s Energy Crisis Decree: The ‘Trigger’ for Mine Shutdowns Has Been Pulled On May 11, 2026, the Peruvian government formally signed and promulgated Emergency Decree No. 003-2026, authorizing state-owned oil company Petroperú to raise up to $2 billion in loans to secure domestic fuel supply. The decree explicitly stipulates that fiscal commitments must not compromise funding earmarked for rural electrification—thus shielding farmers and residents from electricity disruptions—but makes no provision for prioritizing power allocation to industry or mining. Peru ranks as the world’s third-largest copper producer: in 2025, its copper output reached 2.63 million metric tons of metal. Mining, ore processing, and smelting are all highly electricity-intensive; any power shortage thus directly transmits to mine-level output. Peru’s energy woes had long been foreshadowed. On March 1, the nation’s most critical natural gas transmission artery—the Camisea pipeline—ruptured, slashing national gas supply by over 90%. Rationing was immediately imposed, triggering widespread industrial production stoppages. Compounding this, the U.S.–Iran conflict pushed global oil prices higher, worsening Petroperú’s financial distress: its refinery modernization project suffered massive cost overruns, ultimately costing roughly $6.5 billion. Already stripped of investment-grade credit status by 2022, the company now carries approximately $7.9 billion in total debt—nearly half of it short-term—with last year’s losses alone reaching $774 million. By the time the decree was signed, Petroperú had cycled through four chairmen. For the global copper market, Peru’s role is pivotal—supplying roughly 10% of worldwide copper. Energy shortages have lowered mine utilization rates, rapidly amplifying copper-production cut expectations—making this the central catalyst behind the recent copper price breakout. On the night of May 11, the main SHFE copper futures contract opened at RMB 105,140 per ton and closed at RMB 107,200 per ton—a 2.76% gain. LME copper hit an intraday high of USD 13,589 per ton, then surged past the psychological milestone of USD 13,900 per ton during early trading on May 12. Copper’s upward momentum is now unfolding as a systemic repricing—originating squarely in Peru. II. Sulfuric Acid Shortage: A Global ‘Famine’ for Hydrometallurgical Copper The impact of Peru’s decree extends far beyond mine-level extraction—another deeper link in the supply chain—the ‘acid’—is undergoing even more severe disruption. Sulfuric acid is an indispensable raw material for hydrometallurgical copper production, consuming up to 3.5 tons per ton of cathode copper. Since 2026, tightening sulfur supplies from the Middle East and persistent shipping congestion in the Strait of Hormuz have jointly driven global sulfur prices into a doubling surge. Data shows that Mysteel’s North African solid sulfur CFR price stood at just USD 467 per ton on January 1, 2026—but had soared to USD 965 per ton by early May, representing over 100% growth in six months. In the Democratic Republic of Congo (DRC), DDP sulfuric acid prices jumped from USD 500–600 per ton in December 2025 to USD 1,100–1,300 per ton—adding USD 3,300–3,500 per ton to the production cost of hydrometallurgical copper, solely from acid. This explosive cost increase is devastating for hydrometallurgical copper production. Global hydrometallurgical copper capacity is heavily concentrated in the DRC and Zambia, where hydrometallurgical methods account for a substantial share of total copper output.

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