Thomson Reuters






* Morgan Stanley cuts miner to "underweight"


* Sees surplus coming in Great Lakes iron ore market


* Credit Suisse says Cliffs must consider "drastic
solutions"

(Adds Goldman Sachs upgrade, updates share move)


March 27 (Reuters) - Shares of Cliffs Natural Resources Inc
dropped more than 14 percent on Wednesday after Morgan
Stanley downgraded the miner's stock and Credit Suisse slashed
its price target on the shares to $10 from $30.


A big increase in the supply of iron ore pellets in the
Great Lakes region over the next three years could hit earnings
from Cliffs' U.S. iron ore segment hard, Morgan Stanley analyst
Evan Kurtz said in a note to clients.


Credit Suisse analyst Nathan Littlewood, who also sees a
looming pellet surplus in the Great Lakes, said Cliffs may need
to consider "drastic solutions" to shore up its balance sheet in
the next 12 months, from selling iron ore assets in the
Asia-Pacific region to a multibillion-dollar equity offering.


"Major reform is required if this business is to survive the
next commodities cycle, in our view," Littlewood said in a note
to clients.


Kurtz downgraded the stock to "underweight" from
"equal-weight."


U.S. iron ore was responsible for about 60 percent of
Cliffs' earnings before interest, taxes, depreciation and
amortization (EBITDA) in 2012, Kurtz said, and the segment's
EBITDA could drop by half.


In contrast, Goldman Sachs analyst Sal Tharani upgraded
Cliffs to "neutral" from "sell" on Wednesday. "After recent
underperformance, near-term risk-reward appears more balanced,"
Tharani said in a note to clients.


Even before Wednesday's decline, Cliffs' stock had fallen 70
percent over the past 12 months. In February the company
reported a quarterly loss, hurt by a $1 billion writedown and
iron ore prices that swooned in the autumn on weak demand from
China, the world's largest producer and consumer of steel.


At the same time, the company cut its dividend by 76 percent
and announced an equity offering, later priced to raise up to $1
billion.


Cliffs shares were down 14.5 percent at $18.32 in morning
trade on the New York Stock Exchange.