Earlier, a Tehran official said there was no hope of saving some 30 missing crewmen before the ship sank, amid concern over an oil spill as Chinese officials played down fears of a major environmental disaster.
The Sanchi, carrying 136,000 tonnes of light crude oil from Iran, had been burning since colliding with the CF Crystal, a Hong Kong-registered bulk freighter, on January 6.
At around midday Sunday the ship "suddenly ignited", with the entire vessel burning fiercely and a pall of smoke between 800 and 1,000 metres (2,625 and 3,280 feet) high, China's transport ministry said, releasing dramatic pictures of the entire vessel obscured by thick black smoke.
The ship later sank, the official news agency Xinhua cited the State Oceanic Administration as saying.
"There is no hope of finding survivors among the members of the crew," Mohammad Rastad, spokesman for the Iranian rescue team dispatched to Shanghai, told Iran's state broadcaster in Tehran before the tanker went down.
Rastad said information from members of the Crystal crew suggested all the personnel on the Sanchi died in the first hour of the accident "due to the explosion and the release of gas".
The Sanchi, which had been headed to South Korea to deliver its cargo, had a crew of 32 -- 30 Iranians and two Bangladeshis. Only three bodies have been recovered.
Scenes of anger and grief erupted in Tehran as news of the deaths reached dozens of family, friends and colleagues of the crew, who were waiting desperately for information about their loved ones at the National Iranian Tanker Company headquarters.
Labour Minister Ali Rabiei was shown crying on state television as he tried to comfort the wife of one crewman, telling her to "hold your child close and be strong".
Chinese rescuers had on Saturday recovered the tanker's "black box", the transport ministry said, without specifying exactly what had been retrieved.
A reporter with China's state television CCTV aboard a plane from the State Oceanic Administration reported seeing wreckage from the Sanchi, oil on fire, and spilled fuel covering a 10-square-kilometre (3.9-square-mile) area.
"The oil spill situation is very serious," CCTV quoted the reporter as saying on social media.
But the television channel earlier also cited Zhang Yong, a senior engineer with the State Oceanic Administration, as playing down fears of a spill.
"Because this is a light crude oil spill, relatively speaking it has a much smaller impact than other oil spills, because this kind of oil is especially volatile -- most of it has entered the atmosphere, so it's had less impact on the ocean", Zhang was quoted as saying.
"This area should be considered the open sea, very far from places where people live, so the human impact should be minimal."
Rescue efforts had been particularly difficult because at 89 degrees Celsius, the vessel's compartments were too hot for workers to withstand for long, CCTV quoted He Wang, an expert from Chinese oil company Huade Petrochemical, as saying.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
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