The government on Wednesday suspended fishing along an 80-km stretch of the island's coastline, affecting 5600 fishing boats, and hundreds of soldiers have been deployed to clean affected beaches.
The Singapore-registered MV X-Press Pearl, carrying 1486 containers, including 25 tonnes of nitric acid along with other chemicals and cosmetics, was anchored off Sri Lanka's west coast when a fire erupted onboard after an explosion on May 20.
Flaming containers laden with chemicals tumbled into the sea from the ship's deck as emergency crews sought to contain the blaze over the ensuing two weeks.
The craft began to sink early on Wednesday, and a salvage crew tried to tow the vessel to deeper water away from the coast, Fisheries Minister Kanchana Wijesekera said in a tweet, but the attempt was abandoned after several hours.
"The towing of the fire-engulfed X-Press Pearl ship was stopped due to the rear end of the vessel hitting the sea bed," navy spokesman Captain Indika de Silva told Reuters.
Photos taken by the country's air force showed the charred wreck of the ship spewing white smoke as it listed to the right and began sinking, and part of it soon touched the seabed, just 22 metres (73 feet) deep in the immediate area.
The navy was preparing to deal with an oil spill after the ship sank, Silva added.
"The ship has dealt a death blow to our lives," said Joshua Anthony, head of a region fishing union. "We can’t go into the sea which means we can’t make a living."
The X-Press Pearl had left the port of Hazira in India on May 15 and was on its way to Singapore via Colombo.
