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Thermite is a type of redox reaction and produces large quantities of heat (flame and sparks) from a mixture of iron oxide and aluminium powder. The iron(III) oxide is reduced to molten iron by the more reactive metal aluminium in a process called Single replacement or oxidation-reduction. It is a highly exothermic reaction which gives off lots of heat energy which can melt the crucible in which the reaction takes place. The temperature is very high and the resulting molten iron and aluminium oxide pour out of the crucible into sand. This demonstration is a good way to illustrate an oxidation-reduction reaction and the connection between heat energy calculated using Heats of Formation values and Hess' Law and the moles of the limiting reactant.
To balance a chemical equation you need to look at the number of atoms on both sides of the equation. For example if there are four atoms of iron in the reactants and two molecules of oxygen in the products then the equation is balanced. The same can be done with other chemicals.
The aluminium is more reactive than iron so it displaces the oxygen in the iron(III) oxide to form Aluminium oxide. This is called a Single-displacement reaction. A more stable version of this reaction is the rusting of metals. Rust is hydrated iron(III) oxide and is porous so it can spread to the whole surface of the metal. Aluminium oxide isn't porous and so the resulting layer of aluminium oxide protects the metal underneath from further damage by oxidation.