The wood in most colored pencils is either real wood or a composite material made from wood pulp and other additives. Companies such as Crayola and Roseart make colored pencils from real wood. For Crayola, the wood comes from reforested trees in Brazil and Costa Rica. Reforested wood comes from tree farms and not the rain forest in those areas. The wood is cut and shaped into pencil halves before the lead is added.
The "lead" in a colored pencil is not the same as the graphite lead typically found in regular pencils. It is comprised of five components: extenders (fillers), binders, pigments, wax and water. The first two ingredients, extenders and binders, make up the bulk of the pencil lead. Extenders, which include materials such as kaolin, talc and chalk, play the same role as graphite in regular pencils. The binders, which include cellulose ethers and vegetable gums, bring other materials together.
The remaining three "lead" ingredients each play and important role. The pigment brings color to the pencil lead. Each lead has its own combination of synthetic pigments for that color. The water acts with the binder to help the other ingredients blend together. The wax, which can be paraffin, beeswax or carnauba wax, makes the lead smooth and waterproof. All the lead ingredients are mixed together to form a dough which is extruded onto one of the wooden pencil halves.
There are a few other ingredients that go into a colored pencils. A special adhesive is placed on one wooden pencil half after the lead is placed. This adhesive binds the two halves together to make a whole pencil. After the pencils have been dried and cut to size, they are painted corresponding to the color of the pencil lead.