It said so-called legal highs had been "a real game changer" and the health risk was becoming a "substantial" problem.
Some have turned to injecting legal highs, while heroin users are either injecting both or have turned to using the psycho-active substances instead.
There are 12,000 known users who visit needle exchanges across Wales.
"It isn't under control," said Josie Smith, head of substance misuse for Public Health Wales.
"The new psycho-active substances have been a real game changer for risk of Hepatitis C transmissions.
"In Swansea, mephedrone injecting was widespread both among people who weren't injecting before and those people who have history of injecting heroin taking on injecting mephedrone as well or instead of.
"Certainly the advent of these new drugs has been a wake-up call."
She said Public Health Wales had a "much better handle" on the problem now, and was better equipped to test, screen, diagnose and refer for treatment, while drug users are also more aware of the disease.
Current treatment for Hepatitis C can include a year's worth of injections and involve side-effects such as depression, tiredness and feeling sick.
In 2014, scientists said a new treatment "cured" 90% of patients with the infection in 12 weeks.
Ifor Glyn, chief executive of Swansea-based charity Sands Cymru, said there was a "massive amount" of infected users in the city.
"We've found it could be about 70% and a large amount don't know about it," he said.
"It's the same concern as HIV in as much as it's usually transferable through bodily fluids. Unless people get treated it could be fatal."
But he added: "If all these people came forward for Hepatitis C treatment, it would have a massive effect on health budgets.
"We reinforce the message of not to share needles and to have safe sex."
Half of known injecting drug users are at risk of contracting Hepatitis C, Public Health Wales has warned.