The stern of Rena has been left to sink at Astrolabe Reef, while containers holding dangerous goods have been lost in rough seas.
A 150m section of the ship's stern is sinking as a heavy swell continues to batter the cargo ship, which split in two at the weekend.
Up to 300 containers fell overboard when the ship broke overnight on Saturday.
Oil has since been seen leaking from Rena and six oiled penguins have been found - five last night and one this morning.
Officials do not know how much oil there is left on board.
The ship's broken stern looks certain to meet a watery grave.
Maritime New Zealand salvage adviser Captain Jon Walker said it was not possible to haul the stern to shore, as it was in about 90m of water and runs about 150m long.
It also had "zero buoyancy". Sinking was the only option, he said.
A flight to the ship yesterday saw heavy waves gushing into the stern's body. The section of ship was already half-way submerged and on a 23 degree list to the starboard side.
Environment Minister Nick Smith would not comment on whether there would be any effort to remove it afterward.
"These are pretty difficult things to predict. There have been surprises as to how long these things come to a result," he said.
The ship's bow has remained wedged on Astrolabe Reef but it has been made much more vulnerable with the stern breaking off.
Cracks had already formed in the hull by yesterday afternoon.
The current bad weather is forecast to slowly ease over the next three to four days.
There is also uncertainty regarding the whereabouts of lost containers, including those with hazardous goods. Maritime New Zealand salvage unit manager Dave Billington said reports of containers falling overboard started coming through about 8pm on Saturday.
However, it was too dark to assess the situation.
A flight yesterday morning found the ship "broken clean in two".
Mr Smith said about 20 per cent of the containers would float while the rest were expected to sink.
"The priority right now is the recovery of the containers from the stern section," he said.
"There are dangerous goods on board 27 of the containers. Of them, 21 contain cryolite from the Bluff aluminium smelter.
"They are likely to have been released as a consequence of the ship's break-up but are likely to have sunk."
None have yet been found, and only the top-most containers have transponders attached.
Claudine Sharp of Braemar Howells - the company responsible for the processing of containers - said ferrosilicon was believed to be in the remaining six containers. The hazardous chemical can produce large amounts of extremely flammable hydrogen gas when exposed to water.
Ms Sharp said they expected any containers with ferrosilicon inside would sink because, like cryolite, ferrosilicon was heavy.
Ferrosilicon's reaction with water was not mentioned.
Ms Sharp said at last count 837 containers were on board. By yesterday afternoon they had gathered 30 at sites set up around the region, such as at Motiti Island.
The "last resort" use of Harrison's Cut has also been activated, with local residents who originally opposed the idea given 24 hours' notice.
A New Zealand Defence Force vessel has been called on for help and will leave Devonport for Tauranga today.
Containers and debris mostly consisting of milk powder and timber have headed northwest toward Matakana Island and are expected to wash ashore this morning.
However, the shipping lane remained open.
Sonar equipment and a magnetometre were used yesterday to ensure the shipping lane was clear and was expected to continue today, Ms Sharp said.
Navigation warnings were issued by the Bay of Plenty Regional Council yesterday.
Water management group manager Eddie Grogan said people should be aware of the large amount of debris in the water.
"We're asking people to be conscious of the hazards and to be sensible and careful," he said.
Boaties have been asked to navigate the area with extreme caution and travel through the area in daylight only.