We all know aluminum’s qualities–it’s malleable, lightweight and resists corrosion. These properties have made it one of the world’s most commonly used metals. But despite aluminum’s ubiquity, the only aluminum-focused exchange-traded product previously on the market was iPath Dow Jones-UBS Aluminum Total Return Sub-Index ETN (NYSE: JJU). Tracking an unleveraged collection of aluminum futures contracts, the fund has failed to garner much attention and built an average daily trading volume of about 5,000 shares. It’s also been a poor proxy for the aluminum market.

Global X Aluminum takes a different tack, tracking a capitalization-weighted index of 22 companies active in the aluminum industry. Seven of those 22 companies trade in the US, which gives the fund a 21.5 percent weighting to US markets. The fund has a 19.6 percent weighting to Hong Kong and a 15 percent weighting to both Japan and the UK.

While the fund claims to be a pure play on aluminum, its top holding at 13.6 percent of assets is Rio Tinto (NYSE: RIO). The mining giant is only marginally involved in the aluminum business and the majority of its revenue is derived from iron ore. Aside from that, Global X Aluminum seems to deliver on its promises.

Why should investors care about aluminum?

It’s used in everything from construction, packaging, automobiles, and aviation. China is both the largest producer and consumer of the metal, even as its domestic industry has ramped up. That’s led to tightening supplies and encouraged new entrants to the market, particularly in Russia where there are abundant aluminum reserves.

That revitalized post-recession demand for the metal–aluminum demand rose 14 percent last year–has driven strong gains in aluminum prices after the industry’s second-worst downturn in history. This recovery is expected to continue; aluminum demand is forecast to grow by 12 percent in 2011. That estimate could even prove to be too conservative should global manufacturers experience a stronger-than-expected recovery and if auto sales growth accelerates.

It remains to be seen whether ETF Securities, sponsor of a number of physical-metal backed ETFs, will launch a physical aluminum fund in the US similar to the one it launched in London last year.

For now though, Global X Aluminum is a solid way to play an economically sensitive metal.

What’s New

ProShares offers the first exchange-traded funds–not exchange-traded notes–that track volatility in the S&P 500. ProShares VIX Short-Term Futures (NYSE: VIXY) will track the performance of the S&P 500 VIX Short-Term Futures Index, which targets a constant weighted-average term of one month. ProShares VIX Mid-Term Futures (NYSE: VIXM) will do the same on a five-month term.

These two new offerings aren’t organized as open-ended funds; rather they will be treated as partnerships for tax purposes and will issue K-1s at tax time rather than 1099s.

Despite that, with an expense ratio of 0.85 percent, the two funds are among the cheapest options for playing the fear index. But volume is relatively light and concerns over contango–a situation where the a futures price is higher than the future spot price–make this fund suitable only for those investors who have a strong grasp of futures markets.