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Despite common knowledge there is actually no lead in a "lead pencil", the core is in fact made of graphite and wax or oil. Good pencils will have a smooth core that creates a defined mark on the page, with little to no smudging or breakage of the graphite that can cause flecks to be left on the page.
It is made from a form of carbon called graphite. The graphite is mixed with clay and formed into long thin pencil lead.
There exist three main categories of graphite pencils, the B, F, and H classes, each serving unique applications.