. . . while the St. Lawrence Seaway seeks to break out of heavy losses

During the late 1970s, William A. O'Neil, president of the St. Lawrence Seaway Authority, was concerned about the ability of the waterway to handle the traffic. ``We were looking at expansion plans,'' recalls Mr. O'Neil, the Canadian administrator of the water route that stretches some 2,340 miles from the Atlantic Ocean to the head of the Great Lakes. Now, however, ``the opposite is the case. We are looking for business. We have ample capacity well into the next century.''

In fact, traffic has dropped sufficiently that the Seaway Authority is losing money, using up cash reserves. What happened?

According to O'Neil, the basic difficulty is a decline in bulk cargoes moving through the seaway.

Work on the seaway began in 1954, after some 50 years of studies, discussions, and prolonged negotiations between the United States and Canada. One key economic justification for the expensive deepening of channels and canals and the construction of new locks was that vessels could carry grain from the heart of North America to the Atlantic and return with iron ore from Quebec, Labrador, or elsewhere to the bustling steel mills of Chicago; Hamilton, Ont.; Detroit; and Cleveland.

The US Congress, overcoming opposition from the railroads, eventually saw the seaway as opening up a fourth seacoast, vitalizing ports on the Great Lakes.

Today, however, sales of wheat and other grains have declined. With deregulation of the railways and barge transport in the US, more American wheat has been taking advantage of the resulting lower freight rates to US East Coast ports or heading down the Mississippi. And more Canadian grain has left via ports on the West Coast.

Further, the slump in the steel industry has meant a reduced demand for iron ore and imported coal.

The result: Traffic last year dropped more than 20 percent from 1984 shipping season, the most precipitous year-to-year decline the waterway has had since it opened in 1959. On the section between Montreal and Lake Ontario, cargo tonnage was 37.3 million metric tons, the lowest level since 1969. An Ontario government study indicates the Canadian Great Lakes shipping industry may lose 25 ships out of the current fleet of 110 bulk vessels by 1991.

Ore shipments through the Welland Canal were below 7 million tons, a huge drop from the 20 million-ton level recorded less than 10 years ago. Grain shipments amounted to some 16 million tons, compared with 25 million tons averaged over the preceding seven years.

On top of that, two accidents held up traffic. A wall of Lock 7 on the Welland Canal collapsed in mid-October, halting traffic for 24 days, and a ship struck a Quebec bridge in November.

``It was not a vintage year for either the operators or the users of the seaway,'' Mr. O'Neil says.

As for this year, O'Neil expects about the same amount of traffic as last year. ``It depends to some degree on the size of the grain crop we have in western Canada,'' he says. Canada's Prairie Provinces have had two years of poor crops.

The nation has managed to sell much of its grain, with stocks expected to reach low points this summer. So any extra production could mean extra transport. The US has huge surpluses of grain, but it has had more difficulty in selling it. That is partly due to the 1979 embargo imposed by President Jimmy Carter on grain sales to the Soviet Union at the time of the invasion of Afghanistan.

The seaway head also figures on losing more money this year. ``But we will not run out of reserves,'' he predicts.

Last year, the Canadian Seaway Authority lost $25.8 million (Canadian), with expenses totaling $73 million. Because some of that loss represents bookkeeping depreciation charges, the drain on cash reserves was not quite so serious. Reserves dropped from $37 million to $15 million.

One extraordinary charge was $6 million for repair of the Welland Canal lock.

To reduce losses, O'Neil has boosted tolls this year on the canal some 15 percent, equivalent to a 6 percent increase in overall revenues. Further, he has been trimming staff by attrition. Authority employees now number 1,100, about 15 percent below the 1980 level.

``We are always looking at ways to improve our productivity,'' he says. But he points out that locks need constant manning, whether they handle one ship a day or 30.