The fire service says it has contained the fire, but it is still not under control.

The solvent recycling plant was at the centre of a similar alert in January when a cloud of toxic vapour was released after chemicals overheated.

Tunnel closed

In the latest incident at 1530 BST on Friday, witnesses reported a number of muffled explosions and thick clouds of smoke hanging over the area.

There were concerns about toxic fumes, but there have been no reports of injuries.

It is not yet known how the fire started.

The fire stopped Metro trains running between Tynemouth and North Shields, and the Tyne Tunnel road link under the river was closed.

'Spark was cause'

A spokeswoman for North East Ambulance Service said: "There are 40 to 50 different chemicals involved which are highly toxic.

"At the moment we believe there are no casualties."

Distillex managing director Adrian Jones told BBC News Online the fire started in a skip and spread to a compound where drums of flammable solvents are stored.

At its height, the flames were about three times higher than the building

Bruce Walker, eyewitness

"I believe that as they were making a transfer to the skip a spark was created as a natural result of metal contact.

"That caused the ignition of a material that was in the skip. That could be a rag with oil or solvent on it.

"The operator tried to dampen it with a fire extinguisher but was unable to and as a result the fire spread.

"No staff have been injured and we have not heard of any other injuries. I have no idea of the damage," he said.

Eyewitness Bruce Walker, who works one mile from the scene, told BBC News Online:"At its height, the flames were about three times higher than the building and the smoke is about 300 metres high.

"The smoke is stretching all the way down the Tyne."

Skin irritation

Officials from the Environment Agency are at the scene.

A spokeswoman said solvents such as xylene could cause short-term symptoms such as skin, eye, nose and throat irritations, headaches and dizziness after exposure to large doses.

Distillex takes waste chemicals from industry and separates re-usable products from waste and supplies them back to the industry as raw materials.

Police advised people living within the exclusion zone to leave their properties and go to the nearest public building such as the library or the Beacon shopping centre in North Shields.

'People calm'

Rory Fleming, manager of the nearby Beacon shopping centre, said: "We have procedures in place if people come to the centre because they have had to leave their homes.

"Everybody is very calm - everyone knows about the fire but there is no panic."

Police said most people would be able to return to their homes.

The hundred who could not were being offered space to stay overnight at a leisure centre.