Brazil's Cosan, Mitsubishi sign ethanol deal

SAO PAULO (Reuters) - Brazilian sugar and ethanol producer Cosan (CSAN3.SA)(CZZ.N) said on Monday it has signed a long-term contract with Japanese group Mitsubishi (8058.T) to export fuel ethanol to Japan.

The contract is valid for three years and prices will vary according to ethanol rates in the Brazilian market, Cosan said in a statement.

Up to 80 million liters of cane-based ethanol are expected to be shipped every year from Brazilian ports to be turned into the gasoline additive ETBE in the Asian country.

Japan's oil industry mixes ETBE, made by combining ethanol and isobutylene, directly with gasoline because it does not require distribution network modifications that mixing straight ethanol with gasoline would require.

Cosan has an annual production capacity of 2.3 billion liters of ethanol in Brazil. Around 20 percent of the production is exported to Europe, the United States and Asian countries.

The announcement follows Brazilian ethanol group Copersucar's deal with Japan Biofuels Supply LLP (JBSL) a year ago, for exports of up to 200 million liters per year of ethanol.

Japan is a top buyer of Brazilian ethanol but most of the product is for industrial uses, not fuel.

The Asian country, whose automobile fleet is the world's second largest, was a big bet for Brazilian ethanol producers foreseeing a sharp increase in shipments.

But the adoption of mandatory blends by the Japanese government has been slower than anticipated, according to Brazilian market sources.

(Reporting by Inae Riveras; Editing by David Gregorio)