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Aluminium fragments from a torpedo casing have also been found, Dong-A Ilbo newspaper quoted a member of a team investigating the blast as saying.
President Lee Myung-Bak hinted Tuesday that North Korea was involved in the sinking, which cost 46 lives. He promised a "resolute" response when the cause is established following the multinational probe.
The unidentified team member was quoted as saying the explosive traces were found on a funnel that was torn off the Cheonan by the blast on March 26 near the disputed border with North Korea.
"It has been confirmed that the explosive came from a torpedo," the team member was quoted as saying.
Detailed analysis of salvaged aluminium fragments also confirmed they are from a torpedo, the individual said.
"This type of aluminium is not in use in this country. As long as the torpedo was not ours, there is only one country that may attack a South Korean navy vessel," the team member reportedly said.
The paper quoted a senior military official as saying investigators would announce their findings no later than mid-May.
Defence Minister Kim Tae-Young told legislators last Friday that a piece of aluminium that was not from the sunken ship had been retrieved, but did not elaborate.
The North, whose leader Kim Jong-Il is visiting China this week, denies involvement. Kim reportedly met President Hu Jintao Wednesday evening and South Korean analysts have said the ship incident would likely be discussed.
The South has not publicly ruled out a military response if the North is proved to have sunk the Cheonan, but has said it would probably take the issue to the United Nations Security Council.
China is the North's sole major ally and main source of fuel and food. As a permanent veto-wielding council member, its support would be crucial in any attempt to punish the North.
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