Papua New Guinean authorities Saturday began retrieving the bodies of those killed when an overcrowded ferry sank two days ago in what is thought to be among the nation's worst sea accidents.

More than 100 people are still missing from the MV Rabaul Queen, which went down about nine nautical miles off the coast early Thursday. Air and sea search efforts were ongoing despite rough weather.

"Four bodies have been recovered," PNG's National Maritime Safety Authority said in a statement.

"The bodies were discovered in locations corresponding to the search area model that rescuers had widened yesterday (Friday).

"It appears that the debris and any other persons unaccounted for are now situated almost 50 nautical miles to the southeast of the location where the vessel had capsized."

The boat, which was travelling between Kimbe and Lae when it went down, was believed to have more than 360 passengers and crew onboard although an official has said it was licensed to carry 310.

The authority said the 246 people rescued in a joint rescue operation with neighbouring Australia were undergoing medical assessment at the Angau Memorial Hospital in Lae, a major coastal gateway with a large university.

But as the search effort involving seven fixed wing aircraft, three helicopters and seven boats continued, some families in Lae were still hoping to find their loved ones among the survivors.

"I am still... waiting for them to arrive," one elderly woman told the Australian Broadcasting Corporation. "Maybe they are dead by now."

On Friday, Australian Foreign Minister Kevin Rudd said he had grave concerns whether there would be many further survivors, "particularly with challenging weather conditions and the ship being lost in very deep water."

The National Maritime Safety Authority said it would do everything it could to coordinate search and rescue efforts until there is no hope of further survivors being found.

PNG-based Rabaul Shipping, the owner of the vessel, has said it is impossible to say what caused the Japanese-built ship to sink, but that bad weather and the age of the vessel were possible factors.

The ferry had travelled the route on a weekly basis for 11 years without incident and underwent a dry dock service in November, Rabaul Shipping said.

PNG Prime Minister Peter O'Neill has ordered an immediate investigation into the tragedy while Queen Elizabeth II, the country's head of state, has sent a message of sympathy from Buckingham Palace.