Peru's Energy Crisis Disrupts Zinc Concentrate Supply [SMM Analysis]

SMM, May 12:

Due to the rupture of a natural gas pipeline in Peru (Megantoni district, Cusco province), the country fell into a "gas shortage" predicament, with electricity production and fuel supply severely affected. State-owned oil company Petroperú was plunged into a severe financial crisis, and Peru is facing a serious nationwide energy crisis. On May 11, 2026, the Peruvian government issued Emergency Decree No. 003-2026 to address the worsening nationwide energy crisis. The decree ensures the continued operation of state-owned oil company Petroperú and safeguards national energy security through national fiscal guarantees (up to $2.5 billion) and financial innovation instruments (special purpose vehicles + trusts).

According to SMM, Peru, as a major global mining country, is highly susceptible to significant disruptions in mining production and transportation due to energy issues. As a major global producer of zinc concentrates, Peru accounted for approximately 10.5% of global zinc concentrate production in 2025. Meanwhile, China's imports of Peruvian zinc concentrates accounted for 19.5% of total imports, and China's import dependency on Peruvian zinc concentrates stood at 7.7%. Currently, weekly imported zinc concentrate TCs have already fallen to $45.75/dmt, while domestic TCs stood at 700 yuan/mt in metal content, with a further downward trend still in place. If Peruvian zinc mine production is affected, it will accelerate the declining trend of zinc concentrate TCs. In addition, Peru ranks among the world's top silver producers. With silver prices at elevated levels and the boost from by-product profits, smelters have been scrambling to purchase lead-zinc-silver ore with rich content. Going forward, attention also needs to be paid to the production and transportation of lead-zinc-silver ore.

Smelting side, according to SMM, Peru's refined zinc production accounted for less than 3% of global total production, a relatively low share overall. Moreover, China's refined zinc market is in relative surplus and does not rely on imports, so the Peruvian energy crisis has a relatively limited impact on refined zinc supply.

Overall, Peru's energy issues have a limited impact on refined zinc supply but could cause significant disruptions to zinc concentrate production and transportation. If production cuts occur going forward, they will accelerate the decline in both imported and domestic zinc concentrate TCs. Additionally, the reduction in precious metal content such as gold and silver will to some extent squeeze comprehensive smelting profits, increasing production pressure on smelters and providing upward momentum for zinc prices. Close attention needs to be paid to supply developments outside China going forward.