First of all, pencils are not lead pencils. They never have been. I can remember as a child being told not to lick the pencil because lead was poisonous. The center of the wood casing, the drawing medium, is graphite.It always has been.
When discovered, graphite was thought to be a form of lead because of its color. So the word for pencil is several languages means lead pen.
According to Wikipedia, Cumbria England is the only naturally occuring site of pure hard graphite. Until a method of reconstituting graphite powder into a solid form was discovered, England enjoyed a monopoly. Because graphite could be used for lining the molds for cannonballs, the graphite mines were flooded between mining operations, Graphite for pencils had to be smuggled out.
Because the graphite had to be encased in something to use it, sheepskin was used first. Then some time in the late 1500s an Italian couple invented a wooden holder involving a hollowed out stick of juniper wood. A later invention involved two wooden halves that were glued together after the graphite core was inserted.
Even the humble pencil has an amazing history. Who knew?