China's State Oceanic Administration (SOA) said in a statement that it detected fires and dense black smoke in a large area around the Panama-registered oil tanker at around 10 am (local time) today and the entire ship sank at around 3 pm.
A large amount of spilled oil is still burning on the surface around the site, the SOA said.
The administration said it will monitor the oil spills and evaluate the accident's impact on the marine environment, state-run Xinhua news agency reported.
Iran announced that all the ship's 32 crew members -- 30 Iranians and two Bangladeshis were presumed dead, according to Iranian state media.
Only three bodies have been recovered so far.
"There is no hope of finding survivors among the members of the crew," Mohammad Rastad, spokesman for the Iranian rescue team, told Iran's state broadcaster in Tehran before the tanker went down.
"Despite our efforts, it has not been possible to extinguish the fire and recover the bodies due to repeated explosions and gas leaks," he said.
Chinese rescuers had yesterday recovered the tanker's "black box".
Chinese maritime authorities had launched a search and rescue operation for the 30 Iranian and two Bangladeshi crew onboard the Sanchi.
All 21 Chinese crew members on the bulk freighter were rescued.
Environment experts had expressed fear that the accident could create a massive environmental disaster and kill off marine life across a wide area.
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