But the Sri Lankan military accused the Tamil Tigers of forcibly boarding the vessel while it was drifting in the seas, with its cargo of 14,000 tonnes of rice, bound for South Africa from India.
International monitors overseeing a tattered 2004 ceasefire between the Sri Lankan military and the Tamil Tigers also weighed in, saying the rebels must respect international law.
"The Sri Lanka Monitoring Mission has conveyed to the LTTE that the government will conduct a rescue mission to salvage the ship and its crew. SLMM has strongly advised LTTE to allow for this operation to be executed without any delay," the mission said in a statement.
The military said attempts to establish contact with the ship had failed and it was believed that the LTTE's Sea Tigers had disconnected the communication systems.
The crew consisted of Jordanians and Egyptians, the military said.
"The armed pirate act by the LTTE is a clear violation of international maritime laws and the navy has found it difficult to react due to the presence of the ship's crew," the military said.
There was no immediate comment from the Tigers.
The standoff over the ship comes at a time when the Tigers, fighting for an independent homeland for minority Tamils in the north and east, are locked in daily artillery duels with the military which has forced thousands of people to flee.
In fresh fighting on Sunday, the rebels fired artillery and mortar bombs in Batticaloa area in the east, the military said, and government troops returned the fire. No damages were reported.
More than 3,000 civilians, government troops and Tamil fighters have been killed so far this year in ambushes, air raids, ground and naval battles and suicide bombings.
However, the fighting has been largely confined to the north and east, and many fear that it may spread throughout Sri Lanka.