UK appeals court ruling seen months away in LME warehousing case

* Court "reserves judgment" ahead of summer recess on Friday

* Lawyer says ruling unlikely before October

* LME sought to overturn ruling that halted warehouse reform (Adds comments from judge, analyst)

By Eric Onstad and Alexandra Reza

LONDON, July 30 (Reuters) - The London Metal Exchange's attempts to cut backlogs at warehouses with new rules are likely to be delayed again for several months after judges declined to make an immediate ruling on a case holding up the reforms.

A three-judge British appeal court panel "reserved judgment" on Wednesday on whether to overturn or uphold a March ruling in favour of Russian aluminium company United Company Rusal (HKSE: 0486.HK - news) .

The original judgment halted a key reform of the LME's global network of warehouses because the court regarded the consultation process as "unfair and unlawful".

The LME's new rules, originally due to take force in April, were aimed at making owners of warehouses deliver out at least as much metal as they take in.

But Rusal, the world's largest aluminium producer, feared the reforms could unleash supplies onto the market and depress aluminium prices.

The LME's legal team asked on Wednesday for a speedy ruling since the appeals court closes on Friday for a summer recess until October.

Lady Justice Arden, one of three sitting judges, said the practicalities of meeting the request would be "complicated".

The lead lawyer for Rusal's team, Monica Carss-Frisks, said a ruling before the court closes for the summer was unlikely.

"It probably won't be until early October," she told Reuters.

BACKLOGS

The ruling follows a two-day hearing which revolved around the consultation process, not the actual warehouse reforms sought by the LME, which is owned by Hong Kong Exchanges and Clearing Ltd.

Benchmark LME aluminium prices have shed about 30 percent since touching a peak around $2,800 a tonne in May 2011.

Industrial buyers of aluminium, used in transport and to make beverage cans, have had to wait up to two years to get delivery of metal from some LME warehouses and the new rules aim to cut the queues down to a maximum of 50 days.

In light of the delays in the legal process, one analyst questioned the LME's decision to go ahead with an appeal.

"It may be that the LME would have been better off restarting the consultation process, and then they could have been in control of their own destiny. They may end up having to do this anyway," said Nic Brown, head of commodities research at Natixis (Paris: FR0000120685 - news) .

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 has ample supplies of aluminium, the LME moved last year to implement reforms including a cut in the maximum queues.

Rusal filed a court case late last year to stop the reforms.

If implemented, the reforms would have the biggest impact on aluminium at LME-monitored warehouses in the Dutch port of Vlissingen which hold more than 2 million tonnes of the metal and where there is a backlog of over two years to access metal.

Depots in the U.S. city of Detroit also have queues, but investment bank Goldman Sachs (NYSE: GS-PB - news) , which owns those facilities, has decided to follow the new LME rules even before they are implemented.

"We've seen a sharp fall in volume in warehouses in the United States. This is a situation where there is a gradual improvement already taking place. When you contrast that with what is happening in Europe, here, the situation is not improving," Brown said. (Reporting by Eric Onstad and Alexandra Reza; editing by Louise Heavens and David Evans)