If chemfuel catches fire, it will spark briefly before exploding into flames. The higher the quantity of chemfuel in the stack, the larger the explosion. With a little creativity, careful placement of chemfuel stockpiles can be used as components in base defense.
In spite of the description, it is in no way necessary for either the construction or fueling of your ship.
Due to its explosive nature, it needs to be stored safely out of reach of possible hazards, such as doomsday rocket launchers, short circuits or tornadoes.
Chemfuel should be stored in small compartments, each only holding part of your chemfuel stock so an explosion won't destroy your entire stock.