Youths were seen near an industrial building containing 3,000 tonnes of recycled plastic moments before it went up in flames earlier this evening.
The large warehouse, off Jameson Road in Fleetwood, is now expected to collapse due to the heat, which was measured at 750 degrees, as firefighters allow the fire to burn in a controlled manner.
The situation is being assessed on a four-hourly basis by the emergency services and the Environment Agency, which is monitoring the air quality, and crews could decide to tackle the inferno if anything changes, the Gazette understands.
People have been told to keep their windows and doors closed if they can see smoke from the blaze, which was visible for miles.
Lancashire Fire and Rescue Service manager Mark Winder said: "There was a report of youths in the area so at the moment it's suspicious but we are keeping an open mind.
"We have been told the fire involves recycled waste that's been through a process and has been turned into bales.
"They were due to be sent to a biomass energy plant to burn, which is why they're burning really well."
Fire engines from Fleetwood, Blackpool, Bispham, Wesham, St Annes, and South Shore were called out after smoke was spotted at around 6.40pm, as was a high-volume pump from Burnley, an aerial ladder platform from Accrington, and an incident command unit from Fulwood.
A Salvation Army food truck was also on the scene to aid the dozens of firefighters, who set up a relay using their vehicles to pump water from Fleetwood Road up to the site around a mile away.
The building, described as a 'refuse tip' by the fire service, is understood to have changed hands recently. Its owner was at the scene working with firefighters to move flammable material being stored outside the building away from the flames by using a fork-lift truck.
Police officers visited Cala Gran Caravan Holiday Park to advise people staying there to keep their windows and doors closed, while the fire service has since urged anybody who can see the smoke from their home to follow the same advice.
Mr Winder said: "Any smoke from a fire is dangerous, and there are toxins, but we are content with the fact it's burning well and going straight up in the air. It's clean waste, there's nothing harmful dropping down.
"Clearly the fire presents a hazard but it's one we can manage. What we have said is stay out of the smoke and keep windows and doors closed.
"We will certainly be here overnight, 24 hours, or even longer.
"There's a real expectation the structure will collapse at one point because of the heat, but we have enough resources to deal with that if it happens."
Jameson Road remained closed at around 10.30pm, while Sgt Craig Evans, of Lancashire Police, urged onlookers to stay away for their own protection.
"We need the public to stay away, we need to get that message out there," he warned.
"There's a lot of kids getting very close and taking pictures."
A small crowd gathered to watch the fire from a grass verge on Amounderness Way, while some youths were seen crossing the busy road by a police officer, who ordered them to safety.
Nobody is believed to have been hurt in the fire.
For the full story, see Monday's Gazette.