Broken bearing cover near stem
You have the sort of headset where the adjustable race consists of a plastic shield fixed to a steel piece that has the bearing surface and the wrench flats. I think it might be a Shimano Exage Sport.

If you have access to the sort of used bike/parts shop that has bins of old stray headset parts, you might be able to find a replacement. But what you've got has never been super common and even then it's only one model, so you might be looking for a while. On the plus side, uppers tend to die last, so you might be able to find an orphaned one someone squirreled away.

Printing a replacement would be pretty reasonable here too, if you're into that kind of thing. You could saw it in half through the the middle to get the cross section and then lay that on a scanner, and from there make up a new plastic seal part in Fusion 360 or whatever you like and snap it onto the existing bearing race part.

Probably the most reasonable thing is to just replace the headset, or even just the upper.