More than 100 firefighters were sent to tackle the fire at EMR in Saltley, West Midlands Fire Service said.
Power supplies to 4,000 homes were cut off at 19:45 BST because the site of the fire is underneath pylons.
Emergency services were alerted at about 14:00 BST. Residents were advised told to keep doors and windows shut.
National Grid staff is also at the scene because of concerns about a gas main next to a nearby canal.
The fire service said it believed the blaze started accidentally.
A spokesman for Western Power Distribution, which supplies power in the area, told BBC News initial fears that 40,000 homes could be affected were allayed after it temporarily re-routed power around the network.
More updates on this and other stories in Birmingham and the Black Country
Properties in the Nechells and Saltley area were affected, but by 20:50 BST, only five properties were left without power, the spokesman said.
There are now 10 fire engines at the scene in Clarel Avenue. Seventeen were needed at the fire's peak.
BBC WM producer Kevin Pashby tweeted video of smoke billowing into the sky.
West Midlands Fire Service tweeted: "The guys and girls are working really hard to stop this spreading. In dangerous conditions, lots of pops and bangs."
The fire service urged people to stop calling after receiving more than 100 999 calls.
Staff from the Environment Agency, which regulates the site, are at the scene because of initial concerns over pollution.
Neil Johnston, West Midlands Fire Service station commander, said he expected crews to remain at the scene for several days because of the severity of the fire.
From the scene: BBC Midlands Today's Elizabeth Glinka:
There are huge flames and plumes of black smoke coming from the fire with more fire engines arriving at the scene every few minutes.
I believe there are over 100 firefighters here now along with other emergency crews and Network Rail as there are two rail lines nearby.
I've seen a train approach very, very slowly as it has gone through the smoke, although we believe services are managing to get through.
Public Health England has also been called to the scene.
There are no reports of injuries.

Mostyn Hall, near Holywell, which is set in 25 acres (10 hectares) of formal gardens, has been home to the Mostyn family for generations.
Their connection with the area dates back more than 500 years.
The garden is being opened for the first time under the National Garden Scheme which was set up to benefit nursing charities.
The estate has a Japanese garden and a restored Victorian kitchen garden.

Patrick Lawlor, from Darndale in the north of the city, was 24 when he was reported missing on 16 December, 2004.
Detectives plan to search lands close to Belcamp House in Coolock from Monday.
Preparatory work at the site began on Saturday morning and the operation is expected take up to three weeks.
Belcamp House is derelict Georgian mansion and there have been two significant fires at the site over the past 48 hours.
However, it is not believed that there is any connection between the fires and the search operation, which is concentrated on lands some distance away from the house.
On the day he went missing, Mr Lawlor left his house at about 06:30 local time and drove to a nearby shop to buy cigarettes and phone credit.
The red Citroen Saxo he was driving was found a number of days later in a car park on the Forest Road in Swords, behind Dublin Airport.
At the time of his disappearance, Mr Lawlor was of thin build and had short black hair.
He has green eyes and is 5'10" in height.
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