Dwarf commanders spawn at the top of Dwarven towers in the Iron Hills, and are easily recognizable by their red capes and the silver coin in their left hand as well as their trimmed Dwarven armour. Once you reach an alignment of +200 for Durin's Folk, they will allow you to hire troops from them and once you reach +1500 you will of course be able to buy a Horn of Conquest of them for coins.