Dubai Cable Co., the second-largest cable manufacturer in the Middle East, is building its first aluminum plant as customers in Saudi Arabia to the U.S. seek cheaper alternatives to copper for power transmission.

The $60 million factory in Abu Dhabi in the United Arab Emirates will have capacity to produce 50,000 metric tons of aluminum rod and overhead conductors annually, Andrew Shaw, managing director of Dubai Cable, said in an interview Monday at the company’s copper rod plant in Dubai. The project, called Ducab Aluminium Co., will create 120 to 140 jobs with its opening planned for the first quarter of 2016, he said.

Copper is losing about 2 percent a year of demand to less costly materials such as aluminum, or about 500,000 tons, London-based researcher CRU estimates. Aluminum is a third the cost of copper and supplies of aluminum in warehouses monitored by the London Metal Exchange are almost 12 times higher.

“Given the relative economics of copper versus aluminum, particularly in Saudi Arabia, they’ve tended to chose aluminum,” Shaw said. “We see a slow substitution of copper for aluminum, particularly in a country like Saudi which is a very large market.”

Aluminum Premiums

Copper dropped 7.4 percent this year to $5,817 a ton on the LME while aluminum fell 7.8 percent to $1,714 a ton. The premium for aluminum ingot added on top of the price of metal on the LME has declined in the Middle East to $120 to $140 a ton from $415 to $420 a ton at the start of this year, Harish Kumar, manager of operations and sales at Dubai Cable, said.

Dubai Cable, started in 1979, is mostly a copper buyer, purchasing about 135,000 tons of the metal a year, with about 70,000 to 80,000 tons used to make cables. Last year, it bought 8,000 tons of aluminum. Riyadh Cables Group is the biggest cable producer in the Middle East, according to Shaw.

The U.A.E.’s Emirates Global Aluminium will provide all the hot molten metal needed for Ducab Aluminum at the Kizad Khalifa Industrial Zone in Abu Dhabi, Shaw said. “From a logistics and an industrial operating efficiency point of view, this is great. They’re like the mother hen, fostering a downstream industry.”

Ducab Aluminium is 60 percent owned by Dubai Cable, and the rest by Senaat, which owns Abu Dhabi companies including National Petroleum Construction Co. and Emirates Steel. Dubai Cable itself is owned 50 percent by Senaat and the other half by Investment Corp. of Dubai, which oversees the government’s commercial assets.