The public sector steel giant SAIL is in a sweet spot at the moment. Not only are the steel prices set to improve from the current levels allowing the company to gain, but also will help the company to benefit from higher volumes as additional capacity comes on stream, with this the benefit of modernised operations. Steel prices in the global market are expected to remain strong. Analysts at Nomura Securities reckon that they would increase from the current levels of around $580 a tonne to $7,000 a tonne in the next two years. Additionally, the company would be expanding its operations with a capacity expansion plan of Rs 65,000 crore to be completed by 2013-14 in a phased manner. When this happens, SAIL will have total crude steel capacity of 23 million tonne, up from 13 million tonne now. The real gains, however, will stem from the fact that there would be a employee rationalisation. The employee cost is expected to go down from 2008-09 levels of Rs 6,463 a tonne to Rs 3,567 per tonne in 2014, and this itself is expected to improve profitability by Rs 2,900 a tonne, say analysts. At the moment, Tata Steel employee cost stands at Rs 3,390 a tonne. Moreover, the steel major has also been a raw material guzzler with its aged plants. The company uses the highest amount of coking coal to produce a tonne of steel. The usage is pegged at 1.05 tonne of coking coal per tonne of steel as against 0.8 tonne by Tata Steel. This is primarily on account of old blast furnaces and inefficient coke oven batteries. Under the modernisation plan, SAIL will set up sinter plants, which along with improved blast furnaces and coke oven batteries, would reduce coking coal requirements in line with industry standards. Lower coking coal requirements could lead to overall savings of Rs 500 per tonne, add analysts. The overall operating profits are then set to rise from current levels of Rs 7,200 a tonne to Rs 10,100 per tonne in the next three years.