Melbourne factory fire cause investigated

The cause of a major blaze at a recycling plant that blanketed Melbourne's northern suburbs in thick black smoke won't be known for days.

It was the second fire at SKM Recycling in the past eight days and comes five years after the plant burned down.

This blaze took 130 MFB and CFA firefighters almost five hours to control on Tuesday.

An explosion an hour into the firefighting battle temporarily forced crews out of the building.

Nearby residents were warned about the toxic smoke, which spread in a haze across the city's north and CBD.

"Thick black smoke billowed across the city and was visible from as far as Hoppers Crossing, the Melbourne CBD and Brighton," an MFB statement said.

The inferno broke out about 3.30am and led to the evacuation of 100 workers.

Drones have been used to assess the incident and fire investigators are working to establish the cause.

Last week's fire started in a fan in a dust extraction system.

Firefighting efforts on Tuesday were hampered because of the type of dense recycling materials processed at the plant.

A 'watch and act' warning for residents to close windows and vents and bring pets inside, was downgraded to an advice message at 9.15am.

Paramedics treated one man at the scene for smoke inhalation.

Roughly a dozen councils, including Melbourne City Council, deliver recycled waste to the plant with material expected to be diverted to other SKM sites for at least the next few days.