Please go ahead.John Tumazos Trying to put together the different bits and pieces, should we expect something like a $10 a ton cost increase in the Alumina segment in the June quarter? And something like a $0.03 or $0.05 fall in the Aluminum metal segment, which I guess, benefit more from pitch and tar and energy?Molly Beerman John, we didn’t work it out to the ton level. We can certainly do that. I don’t have that handy for you right now.Operator The next question comes from Carlos De Alba with Morgan Stanley. Please go ahead.Carlos De Alba So, first question is coming back to the bauxite situation in Western Australia. So the guidance is for — sequential guidance for $55 million unfavorable impact on lower-grade bauxite in the country.
Given that the situation extends until the first quarter 2024, how should we look at cost going forward? Is this $51 million basically taking us to the level where you were going to be throughout the first quarter or until the first quarter of 2024, or there could be potentially higher negative impact on this situation in the Alumina segment? That will be my first question. And my second question is, if you could maybe comment — provide a little bit more detail on the value-added premiums that you are getting, and if there is any differentiation between Europe and the U.S. that are important for us to take into account?Molly Beerman Okay. Carlos, first, on the $55 million guidance, that is applying to the second quarter, we do see opportunities to work on cost to reduce that.
And we’ll give you updates going forward. But for right now, the $55 million is applying for our future look, and that includes about $10 million impact of volume and about $45 million for caustic, bauxite and energy usages unfavorable at this bauxite grade.Roy Harvey And Carlos, just to tie on to Molly’s comments there, too. I mean, as we look forward to the next quarters, we’re essentially running the Western Australian refineries at lower grades than we have before. And so, there’s a certain amount of learning that we’re going to be doing as we go. And so, like Molly said, the expectation is that we can learn and we can improve upon the operating efficiencies every quarter. But we don’t want to make promises and guarantees on that until we can be certain that we can show that.
So we hope to report some good news for you coming into this next quarter as we look towards future quarters.On value-added premiums, when we look at it year-on-year, we continue to see strength. The fact is, we came into what was a pretty crazy year with the first half with nothing but blue skies and the second half a bit more cloudy. Coming into this year, we’re continuing to see strength. We’re seeing more strength, honestly, in Europe. Part of that is the self sanctioning part of it is also because the energy situation is a lot better than it was expected. So coming into the year, I think we’re seeing better strength in the volumes and in the end, the volumes that impact the premiums that we negotiate on a quarterly basis.In North America, I think there was a bunch of uncertainty because of the banking situation.
I know there were a lot of questions what that might do to demand. We seem to be successfully pass that, at least for now. We’re certainly seeing better premiums than we were last year. But we’re also seeing a little bit of weakness on the billet side, particularly that’s really coming in from building and construction, which just isn’t moving as quickly as what we’ve seen in some other times.So, it’s sort of a mixed picture. I think we’re seeing year-over-year improvement. We’re sort of seeing a continued amount of uncertainty when we look out at the next quarter and hope that with some of the improvements that we’re seeing in demand in China, particularly some of the resolution around what energy prices are going to look like and some of the more surety about what — how much natural gas Europe is going to happen going forward.
I think that starts to build a little bit more resilience back into the market, which then has its knock on impacts in our value-added products.Carlos De Alba So, should we interpret by your comments on construction that we still haven’t seen any meaningful impact from the Infrastructure Bill approved last year in the U.S.?Roy Harvey Carlos, we’ve seen a bunch of announcements and expectations. That’s not transferred through into orders yet. But I would say it’s probably still a little bit early for that money to be dispersed for people to start turning the ideas and concepts into actual on-the-ground orders. Again, I’m pretty — we’ve had a lot of interaction with governments around the IRA, and obviously, in ways that we can be able to use that to help promote our breakthrough technologies.
Just in some of the meetings that I’ve had, there’s a lot of — there tends to be when you have a group, you’ve got a lot of people around the table that are very enthusiastic about investing in the U.S. and building up capacity. And so, I have to say, I’m very bullish, but it’s probably still a little early to see that translate into specific orders for us.Operator The next question comes from Emily Chieng with Goldman Sachs. Please go ahead.Emily Chieng My first is just around the Alumar smelter. I thought that this was going to be a 9-month process in ramping the smelter back to full capacity. So curious what’s driving the delay there? Is it operational, or is there some intentional throttling of volumes back given the pricing environment?Roy Harvey Yes.
Emily, I’ll take that one. It’s more, I guess, logistical and operational in nature. Logistical from the fact that when we were first getting started restarting Alumar, and I know the plant well, I used to work there, it was just harder to get the quality of raw materials that we needed to have a kind of restart that we had expected. So that was a bit of disadvantage when we’re getting started. I think we’ve been able to iron out those issues and now we have the qualities that we needed, to be honest, because we have a good portion of the smelter already operating. It means that you have the raw materials on hand in Europe to generate some of the bath and hot metal that you need to restart that next set of pots.The other was surprise we had at Alumar is that as we got started with those pots that a lot of them have been relined but others have not been relined.
We simply — as we started them, we just didn’t get the ability to keep them operating for as long as we had expected. And stated another way, we had more failures than we expected to have during the restart process. I think that comes down to the fact that it was idled for a good portion of time, a number of years. So, we’ve now got that sort of back on the road, we’re essentially where we expected to be on the restart in the last time we reported at the end of Q4. We have the right management and the right operators and the right people working on this, and I think we’re making real steady progress. And I’m super enthusiastic about that team and about that facility for the long term because of the great power contract that we have and the strength of operations.Emily Chieng Understood.
That makes a lot of sense. And maybe shifting gears to San Ciprián, and I wanted to talk about the refinery there. I believe the gas environment for the San Ciprián — or gas contracts or rather the price of the pot, at what point, given where gas prices are today, is there any consideration to bring back the refining capacity there?Roy Harvey So, I’ll take that one and Molly can jump in if she has some quantitative comments as well. We’re essentially running at 50% capacity. And I can promise you that running a refinery at 50% is never the ideal point. And really, what we’ve been targeting is to try and focus as much on non-metallurgical grade alumina because those tend to be higher-priced contracts and for more specialized operations, but we’re also selling some smelter great alumina as well.
We analyze almost continuously to see at what point have natural gas prices come down. And then, when you look at the price of SGA in the market, does that create a business case for restarting more of that capacity. I’ll put in a short advertisement we have a great workforce in San Ciprián. They really run that refinery really well. They’re running it at levels they’ve not for a very long time, and I’m very pleased with what they’ve done. And we’re on top of things to see when we can make that natural gas price connect with the market environment so that we can bring that capacity back up online again.Molly Beerman I’ll just add that we did see about a $20 million sequential improvement there for that site this quarter. So great progress.Operator The next question comes from Alex Hacking with Citi.
Please go ahead.Alex Hacking I just have a quick follow-up on WA. When will the state EPA make a decision about whether or not to accept the third-party referral? And if they do decide to accept that referral, what is the practical implication of that? Sort of what happens next? Does that constrain your ability to operate in any way and develop new mine plans?Roy Harvey Yes. Alex, I’ll take that one. So, we’re in the midst of sort of the data collection phase where the EPA is considering really two things. Number one is the referral valid, which means it — does it fulfill all the requirements for actually having referral. And then assuming that it’s valid, then going into deciding whether, in fact, it should be assessed, i.e., should there be another process to determine what are the environmental — what are the current and then medium and long-term environmental impacts of that specific project.So, that process will take some time.
