Based on the production of capital and labor, we use the model of BC2 and method of Malmquist Index to analyze the Capacity efficiency of 27 corporations in China’s stock market during 2000~2009. We find out the technology efficiency and dynamic efficiency of china’s iron and steel industry are very low, and lots of production capacity is in idle. The corporations of big scale have a notable advance of technology, but have too much labor slack. Small scale corporations have a high dynamic efficiency, but technology advance is undesirable. As a result, we suggest that the most important thing to improve the technology efficiency of China’s iron and steel industry is improving the productivity of existed capacity. Meanwhile, keeping policies constant and reducing the influence on corporations by new policy can improve dynamic efficiency of China’s iron and steel industry.