The skipper of the K-Cee, Bruce Robert Gordon, 42, and crew member Darren James Allen, 37, have not been heard from since Monday morning.
Wreckage found south of Rocky Point on Secretary Island, which separates Thompson and Doubtful Sounds, has been confirmed as coming from the 30ft aluminium crayboat.
Inspector Lane Todd said today there was still hope the men had managed to get into their dinghy before the boat went down.
"There's also suggestions that there may have been an aluminium dinghy also attached to the vessel so we are hopeful that they've managed to get onto one of those,'' he told Radio New Zealand.
" To date we haven't been able to locate either of those smaller dinghies so until we can locate that evidence we remain hopeful that they've managed to get onto a dinghy.
"Our understanding is that they are very experienced fishermen and have been very experienced in this particular area so that would all obviously go in their favour.''
Drift patterns of wreckage was off-shore heading to sea, which was where searchers would focus this morning.
An Airforce orion had found no sign of the men overnight, but something had been picked up on the radar which would be investigated this morning.
"It's something that's come up on the radar but it was determined when we discussed it last night that it wasn't worth sending a helicopter up at that hour of the night so it's something we'll be looking at at first thing this morning.''
Mr Todd said examination of the parts of the vessel that had been found suggested it had sustained a "major impact''.
"The collateral damage that appeared to be on the hull that's still floating appears to have been some sort of major impact.''
Six vessels and three helicopters would begin searching at first light and a cessna aircraft was on stand-by.
Emergency services were notified about 9.45am yesterday and the search launched after the debris was spotted off Secretary Island.
Police said there had been no contact with the vessel since 8.20am on Monday.
'Still optimistic'
"We've got to remain optimistic," Southland police area commander Insp Todd said last night.
"Given we still haven't found the [K-Cee's] inflatable raft, we'll ... continue."
Yesterday's weather in Fiordland had not "been too bad", which was "favourable if they managed to get out on the safety raft", he said.
Mr Gordon's wife, Natasha, declined to comment yesterday.
She was "not in any state to comment" and it was "not the right time".
Mr Gordon's father, John Gordon, yesterday said he and his wife, Coral, were being supported by friends and family.
He declined further comment.
The semi-submerged hull of the vessel was located about 16km off Secretary Island last night, Insp Todd said.
"That was located just before night-time ... by a helicopter.
Two of the fishing vessels that we have as part of the SAR team got to it, and got a line on it, but could not get a tow on it because of the weight.
"We are leaving it in situ ... it is just too dangerous at the moment to do anything else with it. We have it marked where it is and there will be a follow-up in the morning with it."
A Royal New Zealand Air Force Orion using radar was to continue searching for the men until midnight last night, with a helicopter on stand-by.
Police were notified about 9.30am yesterday - via a fishing vessel in Doubtful Sound - that K-Cee, a 13.5m aluminium crayboat operating in the sound, was overdue.
The last radio report from K-Cee was on Monday at 8.15am.
Conditions off Secretary Island, which separates Thompson and Doubtful sounds, were extremely rough on Monday.
Southland District Mayor Frana Cardno said Te Anau was in shock.
"The whole community gets affected by tragedies like this," she said.
"They have lost part of their community and they have been there a long time ... It is pretty devastating for everyone.
"A friend just came round to borrow my husband's binoculars, and they are going out to search ... everyone who can is going to help in some way or another."
Yesterday's search - which a Maritime New Zealand spokesman described as "category one" - began when Bluff fishermen's radio operator Meri Leask asked all vessels in the area to help look for the boat about 9.45am, after debris was spotted near Secretary Island. Police later confirmed the wreckage was from K-Cee.
Three helicopters, four local boats, a fixed-wing aircraft and a Department of Conservation support vessel were used in yesterday's search.
Asked what was likely to happen today, Insp Todd said: "We've been plotting obviously key findings, which is that wreckage that's been located, and just looking at our patterns with weather and tide, so that's given us a fairly good search area to focus on."
Former fisherman Dave Excell, of Te Anau, said he had spent most of yesterday in a float plane searching the area.
Mr Excell said he had K-Cee built in Invercargill in 1994, and it was named after his family.
He sold the vessel to Mr Gordon, his former crew member, more than four years ago.
The boat was "very seaworthy".
Mr Excell said he fished the area for 15 years.
"You can get caught out. It is shallow for a long way out, and I have had the odd scare out there over the years ... waves can build up outside you sometimes.
"Bruce was experienced in that area."
Southland Harbourmaster Kevin O'Sullivan said the vessel was in good working order and he was surprised to hear something had gone wrong.
In March, Mr Gordon rescued eight people after a 12m catamaran sank in poor weather in Thompson Sound.
One of the men he rescued, Sam Bennett (24), said last night Mr Gordon was a "real, genuine, nice guy".
He described Mr Allen as "a nice guy, too".
He had called a few people to see if he could help, and was waiting for any news from the large search and rescue effort.
CRA8 management committee chief executive Malcolm Lawson could not recall any crayboat sinking in the area over the past decade, "and it has left everyone shocked".
