Peru’s Power Crisis and China’s Import Record Intensify Silver’s Supply Deficit

Silver steady at $87 as structural supply deficit, Peru energy crisis, and record China imports buoy prices, but rising US inflation and rate hike expectations cap gains.

Silver is holding steady near $87 an ounce on Thursday, easing slightly from recent highs as a mix of bullish supply constraints and bearish macro headwinds keeps the metal in a tight range. The spot price slipped 0.51 percent to around $87.08, after briefly testing $88 the previous session. Since the start of the year, silver has still gained more than 22 percent — a rally underpinned by an unprecedented structural shortfall that analysts expect to total 820 million ounces through 2026.

That deficit is now being aggravated by fresh production risks. Peru, one of the world’s top silver-mining regions, has declared a national energy emergency. Electricity rationing is already affecting the mining sector, and because silver is often produced as a byproduct of copper and zinc extraction, any slowdown in base-metals output directly curtails silver supply. New capacity cannot be ramped up quickly, so the disruption adds another layer of tightness to a market already running its fifth consecutive annual deficit.

On the demand side, China continues to absorb physical silver at a record pace. The country imported 1,626 tonnes in the first quarter of 2026, a new high, transforming itself from a net exporter to a dominant net importer. The surge is driven by industrial applications — solar panels, electric vehicles, and AI data centers — that now account for roughly 60 percent of global silver consumption. Export restrictions in China keep more metal at home, further reducing availability on the international market.

HSBC responded to these dynamics on May 14 by raising its silver price forecasts. The bank now expects an average of $75 an ounce in 2026, up from a prior estimate of $68.25, and $68 for 2027 versus $57 previously. Analysts cited the persistent supply deficit and a weaker US dollar as key supports, noting that industrial demand is increasingly outweighing traditional monetary motives.

Yet the macro picture is far from supportive. Fresh US inflation data released this week showed the producer price index climbing six percent in April, driven in part by higher logistics costs linked to Middle East tensions. That has forced a radical repricing of Federal Reserve expectations. Investors have fully priced out any rate cuts for this year, and the FedWatch Tool now indicates a significant probability of a rate hike by spring 2027. For a non-yielding asset like silver, such a hawkish pivot acts as a powerful headwind.

Against this crosscurrent, the market is watching the two-day summit between Donald Trump and Xi Jinping in Beijing. Tariffs, rare earths, and energy security are on the agenda. An early understanding on keeping the Strait of Hormuz open and increasing Chinese purchases of American oil could lower global energy costs, easing inflation and giving the Fed more room to maneuver. For silver, the outcome is critical because China dominates both production and industrial consumption. Any trade breakthrough that stabilizes manufacturing supply chains would reinforce industrial demand.

Technically, the zone around $88 remains a key gauge of sentiment. The metal’s all-time high of $121, set in January, serves as a distant reference point. For now, with Peru’s power crisis compounding a deepening structural deficit and Chinese imports running at record levels, Thursday’s modest retreat looks more like a consolidation within a physically tight market than the start of a correction.