Around 40 staff have been evacuated from Edward Howell Galvanizers on Watery Lane Industrial Estate as a result of the hydrochloric acid spill.
Twenty firefighters, paramedics, Environment Agency and Severn Trent Water staff are all dealing with the incident. The tank contained an estimated 35,000 litres of diluted hydrochloric acid and collapsed at around 8.45am this morning.
Fire Service HQ station commander Steve Horley confirmed that some acid had drained into a brook 200 metres away, but Severn Trent said that there was no risk to the water supply.
No-one was injured and the cause of the collapse is currently unknown.
People in nearby buildings have been told to stay indoors and to keep doors and windows closed while firefighters work to stop the acid entering drains.
A West Midlands Fire Service spokesperson said: "We anticipate that this will be a protracted incident.
"Part of the operation involves the use of lime to neutralise the acid. This has to be done in a slow and controlled way.
"We have around 20 firefighters at the scene, plus one of our specialist environmental units equipped with kit to deal with this kind of incident."
Edward Howell Galvanizers is part of the nationwide Wedge Group Galvanizing. The Wednesfield plant contains two baths for the hot-dip treatment of metal.