You will need one refill lead for a mechanical pencil that takes a relatively thick lead (the one in the image is for a 3mm Pilot Croquis pencil - the refills come in tubes of two). I picked the B grade as its not too soft but will write on most surfaces. You will also need a piece of heat shrink tubing slightly bigger than the 3mm lead. The tube here shrinks from about 5mm to 2.5mm.
Step 2: Tools
To make the pencil you will need a few simple tools: scissors to cut the tubing, lighter (or other heat source) to shrink the tubing, craft knife to trim the tubing.
Step 3: Step 1 - cut to fit
Cut the heat shrink tubing to slightly longer than the pencil lead.
Step 4: Step 2 - insert & shrink
Insert the lead into the tubing and shrink using the lighter. You can leave it like this or trim the ends of the tubing (next step).
Step 5: Final step - trim
Trim the tubing to fit and expose the pencil tip. I marked one here with white tape to make it easier to see in the dark. The final pencil is 4x60mm - it will fit inside even the smallest survival kit. A sharp blade (which MUST be in any survival kit) can be used to keep the tip exposed and sharp. The tubing also keeps the lead in one piece should you accidently drop it.
Coloured or luminous heat shrink tubing would help make it more visible (here are some).