* LME taking legal advice on options, possible appeal
* Rusal welcomes ruling after fears of lower prices
* Aluminium buyers had complained of long queues to get metal (Adds Alcoa shares, more comments)
By Eric Onstad and Veronica Brown
LONDON, March 27 (Reuters) - Russian aluminium producer Rusal dealt a stunning setback to London Metal Exchange plans to cut logjams in warehouses, winning a court decision to halt the reform because consultations had been "unfair and unlawful".
The High Court in London ruled on Thursday in favour of Rusal which feared prices of its products would suffer from the LME's efforts to make owners of warehouses in the exchange's global network deliver metal more quickly to consumers.
"The LME is disappointed with the outcome of the judicial review," said the exchange, the world's biggest marketplace for industrial metals, adding the new rule would not be implemented as scheduled on April 1.
It said it was taking legal advice on its options, including launching an appeal or restarting the consultation.
The LME oversees warehouses where companies that buy metals such as aluminium or copper on its futures market can take delivery of quality-assured supplies if needed.
Big banks and traders that own warehouses and charge rent have profited from letting long queues build up for buyers to withdraw metal. Some also keep huge stocks of aluminium tied up, unavailable to manufacturers, in long-term financing deals.
In a bid to appease critics of this situation, which underpins the cost of obtaining physical metal even though the world is awash with aluminium, the LME moved last year to implement reforms including a cut in the maximum queues.
It was the consultation with stakeholders on this "load-in load-out" rule that the court quashed.
Industry sources and analysts were shocked at the decision.
"This is a huge mess. This was supposed to be the LME cleaning up its act as far as the enormous queues were concerned with aluminium, which have fundamentally undermined the efficiency of the aluminium market," said Nic Brown, head of commodity research at French bank Natixis.
"I'm slightly stunned and very much surprised that the new delivery-out rules are no longer being implemented in April."
Buyers of aluminium, such as soft drinks cans makers, have long complained about queues of over a year to release metal from storage at key locations including Detroit in the United States and Vlissingen in the Netherlands.
But producers worried that a glut of metal, which could be released from warehouses, would hit already weak prices.
The LME, owned by Hong Kong Exchanges and Clearing , had voiced "serious concerns" in court last month over its ability to maintain an orderly base metal market if forced to repeat the consultation.
It said on Thursday that other reforms would go ahead, including a logistical review, a new physical markets committee and new position data. The package agreed last year also beefed up the exchange's powers to act against market abuse and involved a review of its agreement with warehouse owners.
The court found in the LME's favour on other issues.
"It should be noted that the court made no adverse comments on the substantive merits of the proposed changes to LME's warehousing policy," the LME said.
The judgment said the LME's consultation on its new regulations should have included an option to ban or cap the payment of rentals for metal stuck in queues.
"In summary, I have found the LME's consultation to have been unfair and unlawful... and quash the LME's decision to implement the rule," the judge's decision said.
Rusal, the world's largest producer of aluminium, sought court permission last month for the review on grounds including human rights - the right to peaceful enjoyment of its possessions.
"We welcome this decision by the High Court and look forward to working closely with the LME, and indeed all key stakeholders," Rusal's Chief Executive Oleg Deripaska said.
The LME would be required to carry out a fair and lawful consultation process, Rusal added.
Shares in Alcoa Inc, the biggest U.S. aluminium producer, jumped 5.3 percent to $12.50 in early trading on the New York Stock Exchange. "There could be a perception that the premiums... could be larger as a result," said John Tumazos, analyst at Very Independent Research.
Premiums, which buyers pay on top of cash LME prices for spot supplies, have soared to record highs partly due to the warehouses queues and traders believe they could climb further following the court ruling.
Benchmark LME aluminium prices have shed about 40 percent since touching a peak around $2,800 a tonne in May 2011.
Recently, they have been under $1,800 per tonne, close to or below break-even for a big portion of global capacity. (Additional reporting by Harpreet Bhal, Susan Thomas, Polina Devitt in Moscow, Allison Martell in Toronto and Josephine Mason in New York; Editing by Anthony Barker)