The Nationalists are short of War Supplies, so I looked on the supply map and saw a production symbol with 2 WS in the region Villarcayo.
But when I had conquered it, I still had a production of only 2 WS per turn.
So it turned out that the production icon in the Villarcayo region actually belongs to the Reinosa region, where there is a Weapons Factory.
A minor bug report on the placement of that icon.
Further minor confusion: Granada, Zaragossa, Bilbao, Toledo and Madrid are the cities that produce War Supply (apart from the separate Weapons Factories in Durango, Reinosa and Mieres), but only Granada shows an Arms Factory (Weapons Factory) in the city tooltip.