Captain Nurur Rahman, from PNG’s National Maritime Safety Authority (NMSA), told the BBC most people had been rescued from the water.
Efforts were continuing to pick up as many as possible before sunset, he said.
Australia PM Julia Gillard earlier said the incident was a “major tragedy”.
Ms Gillard said the authorities were urgently trying to find out if any Australians were on board.
PNG Prime Minister Peter O’Neill said the cause had yet to be confirmed, and he sent his sympathies to the families of those involved.
The MV Rabaul Queen, operated by PNG company Star Ships, was travelling between the towns of Kimbe and Lae.
It sent out a distress signal in the early hours of Thursday.
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