Shares in Melrose Industries PLC (LSE:MRO, OTC:MLSPF) fell as much 7% after a chemical incident at a GKN Aerospace facility in California triggered mass evacuations and warnings from emergency crews that a storage tank risked exploding.

Authorities said the wider crisis was not yet over, however, warning there remained a risk of a smaller explosion or chemical leak. Evacuation orders were reduced but still covered around 16,000 residents.

The aerospace and engineering group said a “thermal issue” involving a storage tank containing methyl methacrylate, a highly flammable chemical used in aerospace acrylics, was identified at its Garden Grove site in Orange County on 21 May.

Melrose said local authorities had since reduced the evacuation zone and confirmed that there had been “no injuries, leaks or contamination”.

However, local officials and media reports suggested the situation was significantly more serious than the company’s brief update implied.

According to local broadcaster KTLA, about 50,000 residents were forced to leave their homes after emergency services warned that the overheating 34,000-gallon tank could either rupture or explode.

Orange County Fire Authority division chief Craig Covey said on Friday that crews were facing “two options left remaining” – either a spill of “6,000 to 7,000 gallons of very bad chemicals” or a “thermal runaway” explosion.

Officials said temperatures inside the tank had continued to rise despite earlier efforts to stabilise the site, prompting emergency crews to bring in specialists from across the US. Covey described allowing the tank to explode as “unacceptable”.

On Monday, Orange County Fire Authority officials said the threat of a so-called BLEVE – short for boiling liquid expanding vapour explosion – was “off the table” after crews discovered a crack in the tank was releasing pressure.

GKN apologised over the weekend for the “significant disruption” caused to local residents and businesses, saying it was working “tirelessly” with emergency teams to resolve the situation safely.

At 9.10am, the stock was down 25.62p to 483.98p, but off its session low.

In a note, broker Peel Hunt said: “GKN is working closely with customers on operational recovery and supply plans. It is too early to assess the possible financial impact and we will have to wait for further updates from the company. The core investment case is unchanged.”

  ** UPDATE: Adds share price and broker comment **