euro coal-physical prices rise, china returns

* Oct DES ARA trades at $91.00, up 85 cents.

* U.S. domestic coal sales fall 20 pct-BarCap

* Prices remain in range, find floor at $85/T

LONDON, July 20 (Reuters) - Physical prompt coal prices rose slightly on Friday in thin trade on steady demand from Asia and China's return to the spot market.

"Prices are still in a range, tracking oil to a degree but overall it's typically-slow summer trading," one European trader said.

End-user demand in Asia is steady although still limited in Europe and China's return to the spot market has helped bolster coal prices internationally, Deutsche Bank said in a research note on Friday.

"Spot prices have rebounded as China returned to the market - traders have been buying coal on the seaborne market as it started trading at a significant discount to the China domestic coal price," Deutsche Bank said.

Oil gave little direction to coal prices on Friday but the dollar's rally, which spurred a dip in oil towards $106 a barrel on Friday, will have an impact on coal but likely after a delay, traders said..

Coal prices have found a floor at $85 a tonne and are gradually creeping higher, as the impact of production cuts starts to be felt - end-user demand has remained steady in Asia but minimal in Europe.

According to Barclays Capital, U.S. domestic coal shipments fell by 20 percent between October 2011 and March 2012 as cheaper natural gas and warm weather slashed demand for coal-fired power generation.

Consequently, a glut of unwanted U.S. coal was exported and this was the primary reason for benchmark coal prices' slide by more than 30 percent in the same period.

Very few U.S. spot cargoes are now being offered because prices have fallen too far in Europe to make imports viable and this, coupled with cuts in other exporting countries, should rebalance the market and result in limited price recovery this year, traders and end-users said.

Some U.S. utilities have started to burn more coal due a rise in the price of natural gas, which hit 10-year lows in April.

This is a limited trend but could increase with gas prices in the U.S. expected to continue rising.




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