The Philippines halted the search for hundreds of bodies feared trapped on a capsized ferry on Friday after salvage divers discovered 10 tonnes of toxic pesticide on board.

"We are in touch with experts," said Elena Bautista, the head of a taskforce dealing with the aftermath of the disaster.

"They will check the condition of the vessel and make a recommendation as to where best to bore a hole so we can safely remove the chemical."

Sulpicio Lines, the owner of Princess of the Stars, said it did not know it was carrying 400 boxes of endosulfan bound for a Del Monte pineapple plantation in the southern Philippines.

"We were not aware of any pesticide on board," said Ryan Go, a company executive.

Health officials warned exposure to endosulfan could cause nausea, dizziness, convulsions and death.

Bautista said they hoped to retrieve the container over the weekend using a crane from Manila.

Removing it safely will be difficult. The stern of the seven-storey ship is resting on the edge of a reef with only the tip of its bow visible from shore. There is also around 100,000 litres of fuel still on board.

The discovery of the toxic cargo was a grim reminder of how safety standards are flouted in the Philippines, an archipelago of over 7,000 islands with a woeful track record in maritime safety.

RAN AGROUND

Princess of the Stars ran aground during a typhoon and then flipped over in around 15 minutes off the central island of Sibuyan last week with 865 passengers and crew.

The incident is likely to be the Philippines' worst sea accident since the Dona Paz ferry collided with an oil tanker in 1987 killing more than 4,000 people.

Sulpicio Lines, which owns the Princess of the Stars, also owned the Dona Paz.

So far, only 56 survivors have been found; either plucked from the water by fishermen or washed up on surrounding islands.

U.S. and Philippine divers have so far only removed around a dozen bodies. The operation is painstaking due to narrow corridors, floating debris, darkness and the ship's precarious position.

The overall death toll from Typhoon Fengshen could top 1,300, including over 500 people killed in a torrent of flooding that tore up trees and bridges, destroyed homes and forced over 2 million people to evacuate.