The upturned hull of the vessel, which was built in 1984, was first spotted by a NorthLink ferry at 2.30pm this afternoon.
A gale warning had been issued by the Met Office in the early hours of this morning. It had warned of severe force 9 gales, though weather conditions had improved by late afternoon yesterday with force 5 to 7 winds.
The Cemfjord had previously run aground in July off the island of Laeso off the north coast of Denmark. According to police reports the 57-year-old Russian captain was drunk at the helm when they came aboard and had a blood alcohol count over twice the legal limit.
A spokesperson for German shipping firm Brise Schiffahrt in Hamburg, which operates the vessel, said the firm was setting up an emergency response team and that the Russian captain, who was fined by Danish authorites, had been "replaced by a respected Polish captain and master who has been with the firm for many years."
A spokesperson for the Maritime and Coastguard Agency said: "Shetland Coastguard was contacted by the ferry at 2.30 pm to report that the hull of the cargo vessel had been found, although there were no survivors in the immediate vicinity. The 83m cargo vessel was last seen at 1.00 pm yesterday. Eight crew were on board."
- Independent