A second young victim died Thursday after being engulfed by a fireball that injured nearly 500 people at a Taiwan "colour party", as organisers face charges after plumes of decorative powder ignited.

Student Liu Chih-wei, 19, suffered burns to almost his entire body in the disaster, which saw crowds of young revellers overtaken by flames after being sprayed with clouds of multi-coloured corn starch at Saturday's event.

"Liu died this morning. More than 95 percent of his skin was burnt and his respiratory system damaged when he was admitted to hospital," a doctor outside the hospital in the central city of Taichung told reporters.

"After emergency treatment his family did not want to see him suffering any more and decided to let him go," the doctor said.

Another victim, 20-year-old Lee Pei-yun, who had suffered 90 percent burns, died Monday -- the first fatality.

Media reported that Lee's 12-year-old brother was also hospitalised with 80 percent burns.

Around 1,000 spectators had attended the Color Play Asia event at the Formosa Fun Coast water park, just outside the capital Taipei.

More than 200 suffered serious injuries and are being treated across 43 hospitals.

Terrifying amateur footage showed partygoers dancing by a stage when the clouds of powder exploded into flames which swept through the crowd.

Some tried to douse the blaze with fire extinguishers and to put out burning victims who were running screaming for their lives.

Three suspects have been released on bail as prosecutors investigate them on charges of offences against public safety and negligence causing severe injuries.


'Skin will crack open'


While it has yet to emerge exactly how the blast was triggered, authorities have speculated that heat from the stage lighting or cigarettes could have ignited the corn starch.

The company that supplied the corn starch to Color Play Asia said it had warned of its flammability.

Some of those being treated for less serious injuries shared their stories on social media.

"Every step I take feels like my skin will crack open," Leiya Gu, 19, said on her Facebook page where she posted a picture of her lower legs entirely wrapped in gauze.

"The thing I am most afraid of is the changing of the dressing -- every time I shout and my tears flow," she said.

Gu said that she had been standing near the stage and thanked her boyfriend for helping her escape quickly.

"If you didn't immediately bring me away, I may not only have these burns," she said.

With fears for the fate of those who suffered extensive burns, there was one glimmer of hope as a 20-year-old college student regained consciousness in what doctors described as a "miracle".

Lu Yi-ming sustained 90 percent burns but is now conscious and breathing unassisted, doctors at a Taichung hospital said.

Plastic surgeon Lee Tsung-hsun described the speed of his recovery as "a medical miracle" and said that he can wave his hand and respond to questions, Taiwan's Central News Agency reported.